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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

Repossessions: 13.5.1.2.2 Seizing collateral without present right to the property

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

Repossessions: 13.5.1.2.3 Threatening repossession without a present intent to repossess

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

Repossessions: 13.5.6 State Criminal Laws

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.

Repossessions: 13.6.1 Overview of Tort Claims

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.

Consumer Bankruptcy Law and Practice: 1.1.1 Overview

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

Consumer Bankruptcy Law and Practice: 1.1.2.2 Consumer Bankruptcy Amendments of 1984

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.

Consumer Bankruptcy Law and Practice: 1.1.2.3 Bankruptcy Judges, United States Trustees, and Family Farmer Bankruptcy Act of 1986

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

Consumer Bankruptcy Law and Practice: 1.1.2.4 The Bankruptcy Reform Act of 1994

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.

Consumer Bankruptcy Law and Practice: 1.1.2.5 The 2005 Bankruptcy Amendments

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