1.3.1 Why Repossession Cases Are Important
Repossession is one of the most traumatic economic events that can befall a family. Repossession often means loss of the car that a wage earner relies upon to get to work or that a family requires for basic needs such as shopping and medical appointments. Or a family may lose a manufactured home that it relies upon for shelter. Helping families avoid repossession can save them from economic catastrophe.
Handling repossession cases also deters overreaching and fraud. Debtors often end up owing deficiency judgments because they were cheated in the underlying transaction. The debtor may have been sold a car with concealed defects that was not worth half the contract price. Or the seller may have slipped overpriced add-ons into the contract. If the seller repossesses and resells the car, the deficiency that results will be a reflection of the amount that the buyer was overcharged. Preventing the seller from obtaining a deficiency judgment means that the seller does not profit—or at least profits less—from this fraud.
Defending a deficiency action also allows the consumer to bring counterclaims and even class counterclaims with less of a chance that the claims will be forced into arbitration. Because the creditor has chosen to use the courts, an arbitration requirement is less likely to be imposed upon the consumer when defending that action.
Investigating repossession cases may expose systematic overreaching and fraud, such as low-price repossession sales to insiders, “swallowing” of surpluses, “churning” operations in which the same car is sold to and then repossessed from multiple debtors, failure to give required rebates when calculating deficiencies, illegal threats at the time of repossession, and failure to give required notices to debtors. Violations like these may be suitable to challenge in class actions, and significant statutory damages may be available for each class member. Even in individual actions, evidence that the secured party has repeatedly engaged in the same wrongful conduct can help establish wrongful intent and, in appropriate cases, punitive damages.
Even when an arbitration agreement poses an impediment to the consumer bringing a court action against the originating creditor or its assignee, this requirement may not apply when the consumer or some other injured party brings an action against an independent repossession company. Moreover, even if an action cannot be brought in court because of an arbitration clause, conducting a wrongful repossession action in an arbitration proceeding may produce excellent results.