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Repossessions: 13.2.6.2 Multiple Statutory Damages

Under former Article 9, most courts awarded only one set of statutory damages for each repossession, even if the repossession involved multiple violations of Article 9 Part 5.109 Revised Article 9 explicitly adopts this view.

Repossessions: 13.2.6.3 Can the Consumer Recover Both UCC Statutory Damages and Actual, Statutory, or Punitive Damages Under Non-UCC Law?

A consumer cannot receive UCC § 9-625(c)(2) statutory damages (the finance charge plus ten percent of the principal) and actual damages for the same violation.111 The consumer receives one or the other, whichever is greater. But can the consumer recover in the same transaction both section 9-625(c)(2) statutory damages and statutory damages under some other consumer statute? Strong arguments favor allowing such a recovery.

Repossessions: 13.2.7.1 Generally

Revised Article 9 sets out rules for non-consumer transactions about the relationship between defeat of a deficiency judgment claim and the right to an affirmative recovery of actual damages. The uniform version is silent, however, as to the rule in consumer transactions. It is also silent on the question whether a consumer who has defeated a deficiency judgment can recover statutory damages.

Repossessions: 13.2.7.2 Effect on Actual and Statutory Damages When Debtor Has Defeated Deficiency Claim in Non-Consumer Transaction or in Non-Uniform State

Under UCC § 9-625(d), if a debtor’s “deficiency is eliminated under Section 9-626,” then the debtor may recover damages for loss of a surplus. However, if the deficiency has been defeated or reduced under section 9-626, neither the debtor nor any secondary obligor may otherwise recover actual damages for the creditor’s noncompliance with the provisions of Part 6 relating to “collection, enforcement, disposition, or acceptance.”

Repossessions: 13.2.7.4 When Non-UCC State Law Specifically Bars Deficiency

UCC statutory damages are also appropriate when state law other than Article 9 prohibits the creditor’s deficiency. For example, state consumer credit statutes may bar any deficiency action or a deficiency action if the creditor does not comply with certain disposition requirements beyond those specified in the UCC.

Repossessions: 13.2.7.5 Practical Considerations

Consumer attorneys must be careful to structure their pleadings and requests for relief so that the court can both dismiss the deficiency claim and award statutory damages. If the debtor does not request such relief, the court is unlikely to do so on its own.134 To counter any perception that this relief is a windfall,135 it is important to stress the policy behind UCC § 9-625 statutory damages: the damage award is not just to compensate the consumer, but to deter creditor misconduct.

Repossessions: 13.2.8.1 What Limitations Period Applies

One issue that will vary significantly from state to state is what statute of limitations to use for claims for relief under UCC § 9-625. Even after the limitations period has expired, section 9-625 statutory damages will be available by way of recoupment to offset a deficiency. But the statutory damage award can only offset the deficiency, and not result in a positive recovery for the consumer. For the consumer to obtain a positive recovery, the claim or counterclaim must be brought within the limitations period applicable to UCC § 9-625.

Repossessions: 13.3.1 Application of Good Faith Requirement to Repossession Cases

UCC § 1-304 states: “Every contract or duty within [the Uniform Commercial Code] imposes an obligation of good faith in its performance and enforcement.” “Good faith” is defined as honesty in fact and observance of reasonable commercial standards of fair dealing.152 In addition, many states imply a covenant of good faith and fair dealing in all contracts as a matter of common law.153 Decisions applying these statutes vary as to what degree of fault will constitute lack of good faith.

Repossessions: 13.4.1 Overview of UDAP Remedy

Every state has an unfair and deceptive acts and practices (UDAP) statute that authorizes a private cause of action for damages.188 Most UDAP statutes also provide for injunctive relief, attorney fees and either multiple, punitive, or statutory damages.

Repossessions: 13.4.2.1 Importance of Examining the Statutory Language

When utilizing a state UDAP statute to challenge repossession practices, always make sure that the practices fall within the statute’s scope. While UDAP statutes have general applicability to almost all consumer transactions, coverage of repossessions will be an issue in some states. If the statute applies to the sale of goods and services, there may be a question whether it applies only to sales inducements or also to subsequent enforcement of the obligation to pay the sale price. Some statutes also exempt practices by banks or other regulated creditors.

Repossessions: 13.4.3.2 Violation of Other Statute As Basis for UDAP Violation

Violation of a statute designed to protect the public is arguably a per se violation of a state’s UDAP statute.234 If a state’s courts accept this per se approach, violation of any state consumer credit statute or the UCC will lead to an award of UDAP remedies.235 For example, violations of the UCC repossession requirements have been found to be per se violations of state UDAP statutes.236

Repossessions: 13.4.3.3 Contractual Creditor Remedy Provisions As UDAP Violations

UDAP statutes may be utilized to attack adhesion contracts that waive the debtor’s right to challenge unlawful repossession practices, or that contain overreaching creditor remedies or unconscionable security arrangements.237 A good example of the use of a UDAP approach to challenge adhesion credit contracts is the Federal Trade Commission’s Trade Regulation Rule Concerning Credit Practices (FTC Credit Practices Rule).238 The Rule prohibits six unfair creditor remedies found in many consumer cre

Repossessions: 13.4.3.4 Remedies and Limitations in UDAP Repossession Cases

Most UDAP statutes impose an injury requirement of some sort as a condition of a private cause of action.243 Paying money to a creditor in response to a wrongful claim that the consumer owes a deficiency meets this injury requirement.244 Loss of use of a vehicle because of a repossession also meets this requirement.245 A handful of states require the consumer to give notice before filing a UDAP action246

Repossessions: 13.4.4 Federal and State RICO and Civil Theft Claims

The federal Racketeer Influenced and Corrupt Organizations Act (RICO),249 and state RICO statutes250 provide additional remedies for repossession violations.251 When there is a pattern of fraud252 or collection of an unlawful debt, the federal RICO claim will allow federal court jurisdiction and provide treble damages and attorney fees.

Repossessions: 13.4.5 Unconscionability

Unconscionability case law has developed through several different vehicles: common law, UCC § 2-302, UCC § 2A-108, non-UCC statutory unconscionability provisions,264 and some UDAP statutes that prohibit unconscionability or incorporate unconscionability standards into the definition of unfairness or deception.265 However, as there is considerable overlap, case law as to what type of conduct or contract terms may be unconscionable should be helpful irrespective of which of these vehicles was use

Repossessions: 13.5.1.1 Overview

The federal Fair Debt Collection Practices Act (FDCPA)268 has several important applications to repossession practices. As statutory violations provide federal court jurisdiction and can result in awards to the debtor of actual damages, up to $1000 statutory damages, and attorney fees, FDCPA claims should be alleged whenever appropriate.

Repossessions: 13.5.1.2.1 Scope

The FDCPA defines “debt collector” to include, for purposes of certain specific repossession-related prohibitions,271 “any person who uses an instrumentality of interstate commerce or the mails in any business the principal purpose of which is the enforcement of security interests.”272 This language clearly includes independent repossession companies such as automobile repossession services.273 It may also include a servicer of manufactured home de