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1.4.9 Has the Creditor Correctly Computed and Informed the Consumer of the Deficiency or Surplus?

After disposing of the collateral, the creditor applies the proceeds of the sale to the outstanding balance due. The outstanding balance must be reduced by rebates for unearned insurance premiums and finance charges. The creditor can also charge the consumer the costs of repossession and sale. If an amount is still owed after these calculations, the creditor is entitled to seek the remaining balance (the deficiency) from the debtor, but if the sale of the collateral brings in more than the outstanding balance the creditor is required to pay the surplus funds to the debtor.

To determine whether the creditor has properly calculated the surplus or deficiency, the first step should be to examine the explanation that the creditor is required to send in consumer-goods transactions (ones that are for consumer purposes and are secured by consumer goods).11 If the creditor has not already sent an explanation, the consumer should request one (see § 11.2, infra). In addition, if the matter is in litigation, the consumer should obtain the creditor’s records through discovery in order to do a complete review of the calculations.

  • • Has the creditor credited the consumer with all payments made? See § 11.3.2, infra.
  • • Has the creditor imposed late charges or other charges that were not actually due? See §, infra.
  • • Has the creditor rebated all unearned insurance premiums and unearned interest? See §§ 11.3.2, 11.3.3, infra.
  • • Are the creditor’s charges for repossession, reconditioning, storage, and sale inflated, excessive, or fictional? See § 11.3.6, infra.
  • • Has the creditor credited the consumer with the actual and full resale price, including any trade-in? See § 11.3.4, infra.
  • • Was the collateral sold to an insider? If so, and if the price was unreasonably low, Article 9 may require that the consumer be credited with the price that an arms-length sale would have produced. See § 11.3.5, infra.
  • • Did the creditor send the consumer an explanation of the calculation of the deficiency or surplus, as required by Article 9 for consumer-goods transactions and in some states by other state laws? See § 11.2, infra.


  • 11 {11} U.C.C. § 9-616.