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Repossessions: 13.11.3.4.2 Individual arbitration

When an enforceable arbitration agreement forecloses class arbitration, class court litigation, and individual court litigation, adequate client representation may require raising the consumer’s claims in an individual arbitration proceeding. While this is not preferred, under some circumstances consumers may achieve good results, particularly if the selected arbitrator has an open mind on consumer claims.

Repossessions: 13.11.3.4.3 Punitive damages

While an arbitrator may be less likely to award punitive damages than a jury, this tendency is partially offset by the fact that there is much less court review of an arbitrator’s punitive damages award.709 Instead of a judge remitting the jury award and appellate courts reviewing the resulting award, an arbitrator’s award is only subject to very narrow judicial review.710 In fact, the defendant may not even have a due process claim concerning the size of the award, as arbitration is a non-g

Repossessions: 13.11.4 Voir Dire

An attorney trying a repossession case will want jury members who are not prejudiced against the person whose property has been repossessed.713 However, asking jurors if they have ever suffered a repossession risks embarrassing or offending them. A better approach is to ask whether the juror has any friends, co-workers, or family members who have suffered a repossession. Another approach is to preface a potentially embarrassing question with an explanation or excuse, which makes people more likely to respond truthfully.

Repossessions: 13.11.5 Burden of Proof

Normally it is the plaintiff who bears the burden of proof on all elements of an affirmative claim. However, revised Article 9 places the burden of proof on the creditor in non-consumer transactions whenever the amount of a deficiency or surplus is in issue in an action.714 This rule is carefully phrased in a way that applies without regard to whether the creditor or the debtor has initiated suit.

Repossessions: 13.11.6 Settlement

In settling a case involving a repossession, the attorney should be mindful of the importance of restoring the consumer’s credit record. A report of a repossession is particularly damaging to a consumer’s credit record. Many attorneys insist on a clause in the settlement agreement requiring the creditor to retract any adverse reports it made to credit reporting agencies. Sample clauses are provided in another NCLC treatise.715

Repossessions: 13.11.7 Attorney Fees

Article 9 does not explicitly provide for attorney fees for a successful consumer claim or defense. Debtors may be able to argue that the fees they incurred in defending against a deficiency claim are actual damages that may be recovered under Article 9,718 but there are no known cases adopting this view.

Repossessions: 10.1.1 Overview

After repossession, the creditor must sell, lease, license or otherwise dispose of the collateral, unless the debtor has reinstated the contract or redeemed the collateral, or the creditor properly elects to retain the collateral.1 This chapter concentrates on sale of the collateral by the creditor, by far the most common type of disposition, and discusses all aspects of such sales.

Repossessions: 10.1.2 Leases of Repossessed Collateral

Creditors rarely dispose of repossessed consumer goods by leasing them. Creditors would find it difficult to calculate any deficiency owing, because it may be impossible to determine until the conclusion of the lease term.

Repossessions: 10.2.1 Every Aspect of the Sale Must Be Commercially Reasonable

The fundamental rule concerning the sale of repossessed property is that every aspect of the sale must be commercially reasonable,12 including the notice, method, manner, time, place, and terms of the sale, and the accounting to the debtor for any surplus proceeds after the sale.13 This requirement is substantively the same under revised Article 9 as it was under the former version.14 Even the decision to repossess, when the costs of repossession and dis

Repossessions: 7.3.2 Documenting What Property Was Seized or Damaged and by Whom

The consumer’s attorney should develop supporting evidence concerning what property is missing, when and where it was last seen, and its value.13 A written list should be obtained from the consumer, and witnesses who have independent knowledge of what property was with the repossessed collateral should be located. If the creditor returns unsecured property to the consumer, the consumer should inspect it immediately, preferably with a witness, to determine if any items are missing or damaged.

Repossessions: 7.3.3 Creditor Conditions As to Return of Unsecured Property

The consumer should not be required to pay a fee to obtain the release of unsecured property.17 Demanding a fee can be an extortion tactic and should subject the creditor to liability for conversion.18 The Seventh Circuit holds that a repossession agent that demands an unauthorized fee as a condition of returning the debtor’s unsecured personal property violates the Fair Debt Collection Practices Act only if it is seeking the fee on behalf of the creditor, not if it is seeking to cover its o

Repossessions: 7.4.1.1 Conversion Action If Unsecured Personalty Is Not Returned

When the secured party or its agent fails to return unsecured property taken with the repossessed collateral, the consumer has an action against the secured party for conversion for the value of the unsecured personal property not returned.26 A consumer who is not the owner of the property, but who was lawfully in possession of it, may also have standing to assert a conversion claim.27 Conversion is discussed in more detail in

Repossessions: 7.4.1.3 Trespass Action Even If Unsecured Personalty Is Returned

Even if the secured party returns all the unsecured personalty it seized, the consumer still has a cause of action for trespass or conversion for the temporary loss of the use of the consumer’s property.40 Any damage caused by the temporary loss of the personalty may be recovered.41 For example, consumers may recover for the inconvenience and time they spend retrieving the personalty or for lost profits or income they suffer because of the inability to use tools or other seized property vita

Repossessions: 7.4.1.4 Negligence Action If Unsecured Property Is Damaged

If the unsecured property taken with the collateral has been damaged, the consumer has an action for negligence. Once unsecured personalty has been taken in the course of a repossession, even unknowingly, the secured party is in the position of a constructive bailee, with concomitant duties.42 Breach of those duties amounts to negligence and any damages caused by that breach are recoverable.43

Repossessions: 7.4.1.5 Compensatory Damages

If the personal property is never returned to the debtor, then the debtor is entitled to its reasonable value as damages.44 If it is ultimately returned to the debtor, then the debtor is entitled to compensation for its lost use.45 In addition the jurisdiction may allow the debtor to recover consequential damages such as lost wages and emotional distress.46

Repossessions: 7.4.1.6 Creditor Liability for Acts of Repossessor

Another issue that often arises in a tort action against a creditor is whether the secured party bears liability for the unauthorized tortious acts of a repossessor hired by the secured party. Some courts may find liability if the repossessor is an agent, but not if the repossessor is an independent contractor.47

Repossessions: 7.4.1.7 Punitive Damages Recoverable

If the secured party’s actions are particularly egregious, the consumer’s attorney should consider seeking punitive damages in addition to actual damages.50 Claims of conversion, trespass, and negligence all sound in tort, and in most states punitive damages are recoverable in proper circumstances.

Repossessions: 7.4.2 UCC Remedies

Under section 9-625(b) of the Uniform Commercial Code, a creditor who wrongfully repossesses collateral, fails to dispose of repossessed collateral in a commercially reasonable manner, or otherwise violates Article 9 is liable to the debtor for “any loss” caused by this failure.52 A creditor who neglected to give a consumer proper notice of the sale of their repossessed automobile was liable to the consumer under this provision for the value of personal property which was in the collateral at the time of its repossession.

Repossessions: 7.4.3 FDCPA, Other Statutory Sources of Damages

When a repossession agency, rather than the creditor itself, repossesses unsecured personal property, the agency may also violate the federal Fair Debt Collection Practices Act (FDCPA) or an analogous state debt collection law.54 FDCPA coverage of repossession companies is discussed in Chapter 13, infra.

Repossessions: 7.4.4 Evidence and Proof Issues

When unsecured personal property is never returned, it may be difficult to pinpoint when the property was stolen. The theft can occur at the time of seizure by repossession agents, later by employees of the creditor when the car is in the creditor’s possession, by repair shop personnel when the car is being reconditioned for sale, or by almost anyone while the car sits on a lot waiting to be sold.

Repossessions: 7.5.1 Liability Limits for Property Eventually Returned

Creditors attempt to avoid liability for the temporary taking of unsecured property by inserting a clause into the security or credit agreement granting the secured party the right to take unsecured personalty in the course of a repossession and hold it for the debtor without liability. A good example is the clause used at one time by General Motors Acceptance Corp.