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Repossessions: 6.3.5.1.5 Interplay with interest rate restrictions

The Act’s protections against repossession are particularly potent in combination with its requirement that creditors reduce the interest rate on obligations to six percent or less during the period of military service.138 Interest over six percent is forgiven.139 The only exception is if a court determines that the debtor’s ability to pay the original interest rate is not materially affected by the debtor’s entry into military service.140 In the c

Repossessions: 6.3.5.1.6 Remedies

Originally the statute did not expressly authorize a private right of action, although courts had held that an implied cause of action was available for at least certain violations.144 The Act now explicitly provides a private right of action for “any appropriate equitable or declaratory relief,” “all other appropriate relief, including monetary damages,” and attorney fees.145 The statute affords this private cause of action to “any person” aggrieved by a violation of the Act.

Repossessions: 6.3.5.1.7 Non-SCRA restrictions on repossession from military bases

Even if the Servicemembers Civil Relief Act does not apply, or when a debt is incurred after the servicemember enters the service, policy at the military base may require that any repossessor entering the base be accompanied by military police when conducting a repossession.154 However, a repossession conducted in the presence of a debtor who is aware of a police officer’s presence is arguably unlawful, as the official’s participation destroys the self-help nature of the remedy, and requires all of the protections of due process.

Repossessions: 6.3.5.2 Native Americans

Native Americans living on a reservation are specially protected if tribal law prohibits self-help repossession.159 The United States Supreme Court has suggested that courts should defer to the repossession statutes of Native American tribes because tribes have the power to regulate the activities of non-members who enter into consensual relationships with tribal members through contracts and other commercial dealings.160

Repossessions: 6.3.6.1 No State Action in Typical Self-Help Repossession

Self-help repossession offers little or no due process protection to debtors. For example, there is usually no requirement that the debtor be given notice prior to repossession, and the debtor has no opportunity for a hearing prior to or immediately after repossession. This lack of due process would seem to violate constitutional standards. Yet only rarely have courts found the Due Process Clause applicable to self-help repossession. The reason is that constitutional due process requirements apply only if there is state action involved.

Repossessions: 6.3.6.2 When Government Is Creditor

Due process rights may arise when the government itself is the creditor.193 However, an Eighth Circuit decision, while limited to immunity questions, draws a distinction between cases in which the government is considered to be acting in a commercial (traditionally private) capacity and those in which it is acting in a sovereign (governmental) capacity.194 The court did not rule out the possibility that due process protections might be required when the government is acting in a traditionally pr

Repossessions: 6.3.6.4 Fourth Amendment Issues

In addition to constitutional due process rights, official involvement in self-help repossession may trigger rights under the Fourth Amendment, which prohibits unreasonable searches and seizures.225 The Supreme Court has held that a Fourth Amendment violation may occur when there is some meaningful interference with an individual’s possessory interest in property.226 Even if there is a dispute about ownership, an individual’s possession of property is protected by the Fourth Amendment.

Repossessions: 6.3.6.6 State Constitutional Provisions

Some state courts have construed provisions of their state constitutions to confer greater protection on individuals than is afforded by the corresponding provisions of the federal Constitution. In particular, the search and seizure237 and due process238 provisions of state constitutions have been read more expansively by a number of state courts than the United States Supreme Court’s current interpretations of the Fourth and Fourteenth Amendments.

Repossessions: 6.4.1 Overview

The most broadly applicable restriction on the creditor’s use of self-help is that the repossession must not breach the peace.241 This restriction appears in the section of Article 9 that authorizes self-help repossession, but not in the section that authorizes a secured party to repossess collateral pursuant to judicial process.242 A number of state consumer credit laws reiterate this provision.243

Repossessions: 6.4.2 Physical Force

A repossessor’s use of physical force on the person—whether the debtor or someone else251—is a breach of the peace.252 The quantum of force need not be great. The federal Fair Debt Collection Practices Act also prohibits the use or threat of use of violence in debt collection,253 although its coverage of repossessions has significant limitations.254

Repossessions: 6.4.3 Threats; Inciting Violence or Creating a Risk of Injury

A breach of the peace occurs when the debtor is put in fear of immediate physical abuse or is provoked to use violence to protect their property interest.266 The Seventh Circuit approved of jury instructions that repossessors may use force in the process of withdrawing if necessary to repel force, but may not use force to repossess, and may use only such force in defending themselves as is necessary to enable them to withdraw.267

Repossessions: 6.4.5 Breaches That Occur After Repossessor Has Gained Possession

Some courts have recognized a defense to a debtor’s claim of breach of the peace when the breach occurred after the repossessor had gained possession of the collateral.289 These courts often draw artificial distinctions, failing to recognize that a repossession is not complete simply when a vehicle is hooked up to a tow truck or towed a few yards. In that circumstance, with the collateral still within the consumer’s reach, the repossessor has at most partial possession of the collateral, and certainly not secure or exclusive possession.

Repossessions: 5.1 Scope of This Chapter

Upon the debtor’s default, the secured party can seize the collateral through self-help repossession1 or through judicial action.2 This chapter analyzes the latter method: state judicial procedures allowing creditors to recover collateral. These procedures have different names in different states: replevin, detinue, claim and delivery, bail, sequestration, trover, or simply recovery of personal property. For convenience this treatise refers to all of these statutory actions as “replevin.”

Repossessions: 5.2.1 The Nature of the Replevin Action

Every state has a replevin statute and/or specific court rules on replevin proceedings.4 Replevin procedures can be found in the statutory or rule provisions for prejudgment remedies, provisional remedies, or special proceedings. In some states additional procedural requirements to meet due process concerns are found elsewhere in the state’s code or rules, such as in a section on “pre-judgment remedies” that creates standards for replevin, garnishment, and attachment.5

Repossessions: 5.2.3 Elements of the Replevin Action

Replevin determines, between a person seeking property (such as a secured party) and the person possessing the property (such as the debtor in a secured transaction), the rightful possession of the property.

Repossessions: 5.2.4 Overview of Replevin Procedures

As with other legal actions, in a replevin action the plaintiff serves the defendant with a complaint, the defendant answers, and a trial adjudicates factual disputes. However, replevin statutes also offer the plaintiff a prejudgment procedure called a writ of replevin or order of delivery.

Repossessions: 5.2.6 Relationship Between Replevin and Conversion

Conversion is a cause of action closely related to replevin. The elements of the plaintiff’s proof are similar to those required for replevin: the plaintiff’s right to possession, the defendant’s exercise of unauthorized control over the property, interference with the plaintiff’s right to possession, and damages.58

Repossessions: 5.2.7 Relationship Between Replevin and Article 9

The Uniform Commercial Code (UCC) does not displace the replevin remedy.64 For example, sometimes the creditor will initially be unable to use self-help repossession and so begins a replevin action, but later seeks to seize collateral through self-help. This course of action may be acceptable because starting a replevin action does not cut off the secured party’s self-help rights.65

Repossessions: 5.2.8 Debtor Strategies

The debtor has several responses to a replevin action. If the proceeding is initiated via an ex parte writ of replevin, the debtor may be able to challenge the method of issuing the writ of replevin as violative of the United States Constitution.69 In addition, creditors who churn out large numbers of uncontested actions often take shortcuts that violate the procedural requirements of the state replevin statute.