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Repossessions: 13.6.4 Trespass and Invasion of Privacy

Creditors making a wrongful repossession may commit the common law tort of trespass.446 Entering the debtor’s home without permission is a trespass.447 Note, however, that some states recognize a limited privilege for repossessors to enter on private property, such as a driveway or unlocked garage.448 This conditional privilege allows entrance at a reasonable time, and in a reasonable manner, for example by peaceably knocking on the front doo

Repossessions: 13.6.5 Assaults and Related Torts

Threats made in the course of a repossession may be actionable as assault.458 The threat may be verbal459 or through conduct, such as displaying a gun.460 Even shining a flashlight into a garage, causing a consumer who was inside the garage to fear bodily harm, may be assault.461

Repossessions: 13.6.7 Defamation

A creditor may defame the consumer while repossessing the collateral or trying to collect a deficiency.473 Falsely reporting to a credit reporting agency that a vehicle was repossessed because of the debtor’s default, or that the debtor owes a deficiency, may give rise to a defamation claim.

Repossessions: 13.5.1.2.4 Repossession of property exempt by law from seizure

The third, and last, substantive FDCPA provision that explicitly applies to repossessors is taking or threatening to take any nonjudicial action to seize property if the property is exempt by law from such action.305 This provision might apply when the creditor does not have a valid security interest, or the debtor is not in default.

Repossessions: 13.5.1.3.1 Introduction

The FDCPA prohibits numerous other collection practices besides the repossession-related practices identified in the preceding subsections. These prohibitions apply generally to debt collectors. For example, the FDCPA prohibits any deceptive or unfair practice in connection with collection of a debt.

Repossessions: 13.5.1.3.3 Applying the “principal purpose” requirement of the limited-purpose definition

Obduskey issues arise only if the defendant falls into the FDCPA’s limited-purpose definition, and to do so the defendant’s principal purpose must be the enforcement of security interests. This requirement looks to the company’s business model, and not to its specific transgressions in the case at hand. Criteria that courts consider to determine the principal purpose of a business are discussed in NCLC’s Fair Debt Collection treatise.321

Repossessions: 13.5.1.3.4 Repossessor’s acts that go beyond those necessary to enforce a security interest

The second key fact on which Obduskey turned was that the Court believed that the letters the firm sent the consumer were “required” in order to conduct a nonjudicial foreclosure under state law.325 The Obduskey Court emphasized that enforcement of a security interest “does not grant an actor blanket immunity” from the FDCPA.326 As an example, the Court noted that conducting a nonjudicial foreclosure is not a “license to engage in abusive debt collection practices like repe

Repossessions: 13.5.2 State Debt Collection Laws

Many states have enacted state debt collection laws that have a broader scope than the FDCPA. These statutes may apply in full to repossession-related conduct whether or not the collection of money is involved.349 Many of these statutes also go beyond the FDCPA by applying to illegal acts by creditors collecting their own debts, rather than applying just to illegal acts by third-party collectors.350

Repossessions: 13.5.4 State Consumer Credit Statutes

State consumer credit statutes may determine such important repossession issues as when a security interest is valid, when the creditor can accelerate a note, whether the debtor can cure the default, how the collateral can be seized,362 whether the creditor can seek a deficiency, and how the deficiency is calculated. When a state consumer credit law applies, it almost always provides debtor protections beyond those found in the UCC.

Repossessions: 13.5.5 State Limits on Professional Repossessors

A number of states require that those in the business of repossessing property be licensed, or at least follow certain guidelines.385 These provisions are often found in the portion of the state code dealing with private detectives or collection agencies. Even if these statutes do not contain private remedies, claims may be brought as per se violations of state UDAP statutes.386

Repossessions: 10.10.5 “Churning” or Revolving Repossession Schemes

In a revolving repossession or “churning” scheme, a dealer sells a used vehicle or other collateral at retail, and then, after repossession, sells the same collateral a second time to another retail purchaser. In some cases, the dealer will sell the same property three, four, or even more times. This subsection discusses churning schemes involving used vehicles, but the same issues apply to churning schemes involving other collateral.

Repossessions: 10.8.3 Sold to Highest Offer

The sale must be to the person making the highest responsible offer or cash bid.495 Creditors may have a defense if they refuse to sell the collateral to a non-cash bidder whose financial reliability is uncertain, however. The creditor may also be justified in accepting a cash offer instead of an offer involving part cash and part trade-in, particularly when the trade-in has a speculative resale value.496

Repossessions: 10.8.4 Location of Sale

The sale location must allow access to the collateral on the part of the buying public or, in the case of a private sale, the target group of potential purchasers.

Repossessions: 10.8.7 Availability of Collateral for Inspection

The collateral offered for sale at auction must be available for reasonable inspection before the sale.535 An analogous section of UCC Article 2, concerning sellers’ rights to resell goods wrongfully rejected, makes explicit the requirement of availability for inspection prior to a public sale.536 If the collateral is not available for inspection prior to the sale, the only bidders may be wholesale purchasers who buy in large lots for low prices and take their chances.

Repossessions: 10.8.8 Need for Appraisal

While Article 9 does not require the creditor to obtain an appraisal of the property,541 the creditor’s failure to obtain an appraisal can be a factor in finding a sale, particularly a sale without competitive bidding, commercially unreasonable.542 A creditor cannot casually sell a car for junk without appraising its sale value or inspecting the car carefully.543 It was not commercially reasonable for a creditor to resell specialized equipment at a

Repossessions: 10.8.9 Good Faith Bargaining Requirement

Every obligation under the UCC imposes an obligation of good faith in its performance.546 Good faith requires both honesty in fact and the observance of reasonable commercial standards of fair dealing.547

The good faith requirement has particular importance for sales without competitive bidding. If the creditor elects to dispose of the collateral without such bidding, the creditor must be careful to engage in good faith bargaining and make sure that there is no self-dealing.

Repossessions: 13.11.3.3 Does the Court or Arbitrator Determine Arbitrability?

A preliminary matter in any challenge to the enforceability of an arbitration clause is whether the enforceability determination is to be made by a court or by the arbitrator. In Rent-A-Center, West, Inc. v. Jackson,697 the United States Supreme Court held that, “ordinarily,” issues about whether parties have agreed to a valid arbitration clause are for a court—not an arbitrator—to decide.

Repossessions: 13.11.3.4.1 Class arbitration

When an arbitration clause prohibits classwide arbitration, an arbitrator is unlikely to allow such relief, and a court would almost certainly overturn such an award. But not all arbitration clauses prohibit classwide relief—some are silent on the issue.