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Repossessions: 10.4.4.1 UCC Definition of “Send”

Section 9-611(c) requires the secured party to send notification of the sale.144 Article 9 includes its own definition of “send” instead of incorporating the general definition found in Article 1.145 The core of the Article 9 definition is “to deposit in the mail, deliver for transmission, or transmit by any other usual means, with postage or cost of transmission provided for, addressed to any address reasonable under the circumstances.”146

Repossessions: 10.4.4.2 Electronic Notice

Article 9 allows notice to be given by electronic means of transmission,151 but secured parties may not transmit the notice of sale electronically as a way to avoid giving actual notice to the consumer. Section 9-611(b) requires “reasonable” notification of the sale, and official comment 2 specifically states that the manner in which the notice is sent must be reasonable.

Repossessions: 10.4.5.1 Notice Required Regardless of How and When Creditor Acquires Possession

Voluntary surrender does not constitute waiver of notice of sale, so a debtor who voluntarily surrenders the collateral must receive notice of the sale.159 Notice is required regardless of whether the creditor acquires possession of the collateral before or after default, and regardless of whether the creditor makes a formal declaration of default.160 If the default is cured under state law after the notice of sale has been sent and there is a subsequent default, a new notice must be sent, becau

Repossessions: 10.4.5.2 Notice Required Despite Debtor’s Actual Knowledge or Inability to Buy

Under the former version of Article 9, some courts found that a debtor’s actual knowledge of the sale was sufficient to satisfy the notice requirement, even when the creditor failed to send notice.161 Other cases held that when the creditor failed to send notice to the debtor, the debtor’s actual knowledge of the sale did not cure the creditor’s violation and the creditor acted in a commercially unreasonable fashion.162 Because revised Article 9 requires the notice to inform the consumer of much

Repossessions: 10.4.5.3 Narrow Exception When Collateral Is Perishable, Declining in Value, or Sold on “Recognized Market”

Article 9 provides that notice is not required if the collateral is perishable, threatens to decline speedily in value, or is of a type customarily sold on a recognized market.166 The rationale for the exception for collateral that is perishable or likely to decline speedily in value is to prevent a decline in value of the collateral while notice is being sent, and the provision is thus intended to protect the debtor.167 The reason that sale in a recognized market excuses notice of sale is that

Repossessions: 10.4.7.1 Debtor’s Waiver of Notice

The debtor may not waive the right to receive notice except by an agreement entered into and signed or otherwise authenticated after default.195 The former version of Article 9 contained this same rule, and many courts refused to recognize waivers entered into prior to default.196

Repossessions: 10.4.7.2 Guarantor’s Waiver of Notice

Courts were split under the former version of Article 9 as to whether guarantors could, prior to default, waive their right to notice.214 Former UCC § 9-504(3) allowed a “debtor” to waive notice after default, but did not define whether debtor included guarantors. The majority rule was that guarantors could not waive notice prior to default, and most of the cases reaching the contrary conclusion involved commercial transactions, particularly guarantors of Small Business Administration loans.

Repossessions: 10.4.8.1 UCC Requirements

The requirement that the secured party give “reasonable notification” of the sale218 includes a requirement that the timing of the notice be reasonable—that it be sent “a reasonable time before the disposition is to take place.”219

Repossessions: 10.4.8.2 Requirements Under Other State Statutes

In some states, non-UCC statutes prescribe a minimum time period between the giving of notice and the sale.239 For example, California law requires at least ten days prior notice if repossessed goods are to be sold at public sale and at least fifteen days’ notice before disposing of a motor vehicle.240

Repossessions: 10.4.10 Each Co-Debtor and Secondary Obligor Must Receive a Separate Notice

Notice may be inadequate if the creditor fails to send a separate envelope and notice to each co-debtor, even married co-debtors.263 For example, notice sent to the debtor’s husband was inadequate as to the debtor, even though she signed for the notice, when there was no evidence that she read or had knowledge of its contents.264 In one case, a creditor mailed its notice in one envelope addressed to both spouses at the address listed on the contract.

Repossessions: 13.6.2.1 Elements of Conversion

The tort of conversion is often available as a remedy for wrongful repossession or disposition of collateral. A conversion occurs when one wrongfully exercises dominion or control over another’s property.397 The elements of the tort are usually listed as: (1) intentionally interfering, controlling or taking property belonging to another; (2) without the owner’s consent; (3) resulting in serious interference with the rights of the owner to possess the property.398

Repossessions: 13.6.2.3 Trespass to Chattels

Even if the secured party eventually returns a wrongfully repossessed vehicle, or returns the unsecured personalty seized with a lawfully repossessed vehicle, the consumer still has a cause of action for conversion or trespass to chattels.431 According to the Restatement (Second) of Torts, a person commits trespass to chattels by intentionally dispossessing another of a chattel, depriving the other of its use for a substantial time, or impairing the chattel’s condition, quality, or value.432

Repossessions: 13.6.3 Negligence

Debtors often have negligence claims when repossession violations occur. For example, a negligence action is possible when collateral has been damaged after being taken. 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.437 Breach of those duties amounts to negligence and any damages caused by that breach are recoverable.438

Repossessions: 13.6.4 Trespass and Invasion of Privacy

Creditors making a wrongful repossession may commit the common law tort of trespass.446 Entering the debtor’s home without permission is a trespass.447 Note, however, that some states recognize a limited privilege for repossessors to enter on private property, such as a driveway or unlocked garage.448 This conditional privilege allows entrance at a reasonable time, and in a reasonable manner, for example by peaceably knocking on the front doo

Repossessions: 13.6.5 Assaults and Related Torts

Threats made in the course of a repossession may be actionable as assault.458 The threat may be verbal459 or through conduct, such as displaying a gun.460 Even shining a flashlight into a garage, causing a consumer who was inside the garage to fear bodily harm, may be assault.461

Repossessions: 13.6.7 Defamation

A creditor may defame the consumer while repossessing the collateral or trying to collect a deficiency.473 Falsely reporting to a credit reporting agency that a vehicle was repossessed because of the debtor’s default, or that the debtor owes a deficiency, may give rise to a defamation claim.

Repossessions: 13.5.1.2.4 Repossession of property exempt by law from seizure

The third, and last, substantive FDCPA provision that explicitly applies to repossessors is taking or threatening to take any nonjudicial action to seize property if the property is exempt by law from such action.305 This provision might apply when the creditor does not have a valid security interest, or the debtor is not in default.

Repossessions: 13.5.1.3.1 Introduction

The FDCPA prohibits numerous other collection practices besides the repossession-related practices identified in the preceding subsections. These prohibitions apply generally to debt collectors. For example, the FDCPA prohibits any deceptive or unfair practice in connection with collection of a debt.