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Repossessions: 13.11.1 Long-Arm Jurisdiction in Repossession Cases

Often repossession occurs at the direction of an out-of-state creditor. Whether the courts of the state where the repossession occurs have jurisdiction over the out-of-state creditor will depend on the state’s long-arm jurisdiction statute and constitutional standards. Many states’ long-arm statutes allow jurisdiction to the maximum extent allowed by the Constitution, so the statutory and constitutional tests tend to merge.

Repossessions: 13.11.2 Pleadings and Discovery

Sample pleadings and discovery materials under revised Article 9 are included in and , infra. These documents are also available in word-processing format online as companion material to this treatise. The online companion materials also include a variety of pleadings and discovery from repossession cases under the former version of Article 9 that can be adapted for use under revised Article 9.

Repossessions: 13.11.3.1 Introduction

Mandatory arbitration provisions are widespread in consumer credit contracts. Creditors insist on this requirement because it significantly limits their exposure to classwide damages, punitive damages awards, discovery, publicity, and even individual damage claims. As a general rule, consumer litigants will want to avoid arbitration requirements for these very reasons.

Repossessions: 13.11.3.2.1 No arbitration requirement for manufactured home loans

The Truth in Lending Act (TILA) and Regulation Z require that no manufactured home loan include an arbitration requirement.652 “A contract or other agreement for a consumer credit transaction secured by a dwelling (including a home equity line of credit secured by the consumer’s principal dwelling) may not include terms that require arbitration. . .

Repossessions: 13.11.3.2.2 No arbitration requirement for non-purchase-money credit extended to military personnel or dependents

The Military Lending Act (MLA) prohibits arbitration clauses in certain consumer credit agreements made with military personnel or their dependents, or the enforcement of such a consumer credit agreement.657 Department of Defense (DoD) regulations define the scope of consumer credit to which the prohibition applies, including, as of October 3, 2016, any type of automobile title loan or any other closed-end credit that takes a non-purchase-money security interest in a motor vehicle or other collateral.

Repossessions: 13.11.3.2.5 Defendant must produce the arbitration agreement

Arbitration is a matter of agreement between the parties. If there is no arbitration agreement, then there is no arbitration requirement. Before a creditor or the creditor’s assignee can force a claim into arbitration, it must produce an agreement that applies to the particular consumer plaintiff, and that agreement must contain an arbitration clause.673 It cannot just produce evidence that there is an agreement.

Repossessions: 13.11.3.2.6 When the sole designated arbitration forum is unavailable

Arbitration agreements typically specify one or more arbitration forums that will administer the arbitration, such as the American Arbitration Association (AAA) or JAMS. These two organizations have consumer protocols and the AAA requires that creditors register their arbitration agreements, and may refuse to administer the arbitration if they do not. In such cases a court will have to determine the parties’ intent, as indicated in the arbitration agreement, whether the forum designation is integral and not ancillary to the agreement.

Repossessions: 13.11.3.2.7 Has the arbitration agreement been superseded by another contract?

Because arbitration is a matter of agreement between the parties, an arbitration requirement is not effective if found in an agreement that has been superseded by a later agreement that does not contain an arbitration requirement. Courts are divided as to whether an arbitration requirement is effective when a vehicle buyer’s order contains the arbitration requirement, but an arbitration agreement is not present in the vehicle’s installment sales agreement.675

Repossessions: 13.11.3.2.10 Does the arbitration agreement apply to the dispute and to the parties?

In general, only the parties to the arbitration agreement are bound by the agreement.686 While the creditor’s assignees and agents may be able to invoke the arbitration requirement, other third parties, such as independent repossession companies, debt collectors, police officers, or third parties not explicitly mentioned in the arbitration agreement, may not be able to do so.687 Similarly, consumers (such as family members) who do not sign an arbitration agreement are generally not bound by

Repossessions: 13.11.3.2.11 When arbitration clause excludes self-help remedies

Many creditors, seeking to preserve their own judicial and self-help remedies, draft their arbitration clauses to exclude from the arbitration requirement claims relating to replevin and repossession.694 The meaning of such a clause is a matter of contract construction, and it may be possible to construe it to allow both the creditor’s and the consumer’s repossession-related claims to be litigated in a judicial forum.

Repossessions: 13.11.3.2.12 When usury voids the contract

One might think that a usurious or illegal contract that is unenforceable under state law would also mean that the arbitration requirement is unenforceable. But the United States Supreme Court has stated that this is not the case, that the arbitration clause must be looked at independently from the rest of the contract.696

Unfair and Deceptive Acts and Practices: 3.2.7.3.6 Illinois UDAP statute has unique treatment for violation of credit statutes

The Illinois UDAP statute provides that any person who in one year commits three or more violations of certain specified credit statutes, including the Consumer Finance Act, the Consumer Installment Loan Act, the Motor Vehicle Retail Installment Sales Act, the Interest Act, or the wage garnishment and assignment laws, as determined in a civil or criminal proceeding, has engaged in a per se UDAP violation.66 In addition, any person who in a judicial proceeding is found to have willfully and materially violated a state credit statute has committe

Unfair and Deceptive Acts and Practices: 3.2.7.3.7 Massachusetts UDAP regulation finds statutory violations to be per se UDAP violations

Under a Massachusetts regulation it is per se unfair or deceptive to fail to comply with existing statutes, rules, or regulations meant for the protection of the public’s health, safety, or welfare.68 The Massachusetts regulation has survived a challenge based upon constitutional and statutory arguments.69 Consequently, Massachusetts courts have little trouble finding a violation of other law a per se UDAP violation, simply pointing to the attorney general’s regulation.

Repossessions: 7.1 Description of the Problem

Creditors repossessing motor vehicles, boats, manufactured homes, or other collateral may seize items in the collateral, such as the consumer’s cash, documents, tools, or other personal belongings, in which the creditor has no security interest. Although creditors sometimes promptly return this unsecured property, other times the creditor is slow in returning the property, returns the property damaged, or never returns the property.

Repossessions: 7.2 Application of Bailment Law to Unsecured Personal Property

After acquiring unsecured personal property as part of a repossession, the creditor has the duties of a constructive bailee,3 and must exercise reasonable care in the handling of the personal property.4 The level of care that the bailee must exercise depends on how the court categorizes the bailment.5 In the case of personal property repossessed along with collateral, it could be argued that such an acquisition was incidental to the larger lo

Repossessions: 7.3.1 Demanding Return of the Property

After unsecured personal property is seized, consumers should demand the immediate return of the unsecured personalty. Even if the demand seems futile, the consumer should always make a written demand for the personalty as soon as is practicable, itemizing the nature and, if possible, the value of each item.

Repossessions: 10.4.11.1 Generally

Article 9 specifies the required content of the notice.268 The former version of Article 9 explicitly required only that the notice state the time and place of a public sale or the date after which a private sale would occur. Revised Article 9 has preserved this requirement, but has added a number of other requirements. In every case, whether a consumer-goods transaction or not, the notice must include: