Repossessions: 13.4.2.2 Determining If UDAP Statute Applies to Repossession and Collection Practices
After a statute’s language is carefully reviewed, it may be necessary to see how courts interpret ambiguous scope issues.
After a statute’s language is carefully reviewed, it may be necessary to see how courts interpret ambiguous scope issues.
Another issue is whether credit transactions are covered by a state UDAP statute. If credit transactions are outside the scope of the statute, courts may find efforts to enforce a credit obligation to be outside the statute’s scope as well.
State courts and the Federal Trade Commission (FTC) have found a number of specific repossession practices to be unfair or deceptive:
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
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
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
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.
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
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.
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
One of the substantive FDCPA provisions that explicitly applies to repossessors is taking or threatening to take any nonjudicial action to seize or disable property if there is no present right to possession of the property claimed as collateral through an enforceable security interest.287 For example, attempts to seize property when the creditor has an invalid security interest violate this section.288 So does seizing a vehicle owned not by the debtor, but by a fam
Another substantive FDCPA prohibition that explicitly applies to repossessors is threatening to take any nonjudicial action to seize or disable property when there is no present intention to take possession of the property.303 The repossessor’s lack of intent to seize the collateral can be shown indirectly if only a minor amount is delinquent or outstanding, if the creditor has not repossessed similar collateral under similar circumstances in the past, if the debt collector has no authority to repossess the property, or if the repossessor f
Wrongful repossession may involve such state criminal code violations as assault and battery or burglary.387 Although prosecutors will not pursue all criminal complaints, debtors should consider pressing a complaint when serious repossession violations occur. The debtor will not receive individual relief (unless plea bargaining or sentencing results in restitution), but the criminal action will deter future creditor misconduct.
Common law torts such as conversion, negligence, trespass, assault, infliction of emotional distress, and invasion of privacy may provide remedies when unsecured property is seized, when unlawful methods are used to seize secured or leased property, or when other improper repossession acts are committed.
The past fifty years have, with a brief retrenchment after the 2008 financial crisis, seen an explosive increase in the already easy availability of consumer credit in the United States.1 The significantly higher debt loads carried by more and more American consumers, particularly those of low and moderate income, render them and their families vulnerable to enormous financial difficulties when they suffer income interruptions.2 Exorbitant interest rates and fees that quickly accumulate upon a default h
The significant benefits of the Bankruptcy Code for consumer debtors were noted early on by creditors as well. Within a year after the Code’s effective date, the consumer credit industry mounted a drive to drastically cut back on the relief obtainable in bankruptcy and, in some ways, to tilt the law in creditors’ favor even more than it had been under the prior Bankruptcy Act.
In 1986, Congress again made substantial changes in the Bankruptcy Code, passing the Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986.9 Besides adding a substantial number of new bankruptcy judgeships in many judicial districts, the 1986 Act made the many changes necessary to institute a phased-in United States trustee system to handle many administrative functions formerly handled by the court.10 It also created a new chapter 12 of the Bankruptcy Code especially tai
In the waning hours of the 103d Congress, lawmakers addressed bankruptcy once more, passing the Bankruptcy Reform Act of 1994.13 That Act, the culmination of four years of legislative efforts, made changes to numerous parts of the Bankruptcy Code, more changes than any legislation since the original enactment of the Bankruptcy Reform Act of 1978.
On April 20, 2005, the President signed the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005” (the 2005 Act).37 The Act, 512 pages in length, made significant changes to the Bankruptcy Code and other bankruptcy statutes, and affects nearly every aspect of bankruptcy cases. The Act in general took effect on October 17, 2005. Several provisions, however, became effective upon enactment, while other provisions had individualized effective dates.38
Over the years, Congress has occasionally made other amendments to the Bankruptcy Code, usually tucked away in appropriations bills that received little scrutiny.
Despite its potential importance to consumer clients, the use of bankruptcy law is avoided by some attorneys. These practitioners see bankruptcy as an intimidating maze of paperwork in an unfamiliar and sometimes (for rural offices) inconvenient forum. And, perhaps, a touch of the old-time stigma still remains from the early days of consumer debtor representation, that saw bankruptcy as a lazy cop-out, either for client or lawyer, if not just a bit immoral.
It is incumbent upon those who represent financially troubled clients to have a basic knowledge of what can be accomplished through the use of bankruptcy. Not only may such knowledge save a client thousands of dollars, a home, a car, or a job, but it may accomplish these desired results better, faster, and with less expenditure of attorney and client resources than any other means. The bankruptcy court may be a more favorable forum for the raising of affirmative claims and may dispose of them more quickly.
This treatise provides the basic information needed to best utilize the tools that bankruptcy provides to consumer debtors. Of necessity, most of what follows is also applicable to debtors who have had small businesses; many consumer clients are, after all, simply businesspeople who have fallen upon hard times and no longer operate their businesses.
This treatise is intended to serve as a basic resource to advocates, both attorneys and paralegals working with attorneys, handling bankruptcy cases. It is meant to provide an introduction for the novice considering their first bankruptcy case and also a useful tool for the expert who has handled many such cases. It should be serviceable both as a quick reference in offices with substantial libraries as well as a fairly complete basic resource in those offices that maintain only a minimal library immediately accessible.