Oregon repossession laws grant creditors the right to repossess collateral if a borrower stops making payments on that collateral. These transactions are referred to as “secured transactions” because the creditor retains a security in the item. That security (or lien) allows the creditor to repossess the item without getting a court order. The most common example of a secured transaction is a loan for a car.
A creditor agrees to lend a consumer money to finance a large purchase in exchange for the consumer agreeing to make payments to the creditor until the consumer pays the loan in full. In addition, the creditor charges interest. Until the consumer pays off the loan, the creditor can repossess the item if the consumer goes into default. Default means the consumer stopped making payments, made a late payment or otherwise violated the sales contract.
The sales contract governs the specific terms of the agreement. For instance, the sales contract sets out the interest rate for the loan, the number of payments to be made and the total amount of the loan. The sales contract typically has other requirements, such as providing that the consumer must keep the car insured at all times.
The consumer usually holds title for the item. However, the creditor must have its secured interest on the item noted on the title. To do so, the creditor must apply to the Oregon Department of Motor Vehicles. If the creditor does not have its secured interest noted in the item’s title, it cannot repossess without getting a court order. This process is commonly called “perfecting.”
If the creditor has perfected its security interest and the consumer goes into default, Oregon repossession laws permit the creditor to use “self-help repossession.” Self-help repossession involves, for example, the creditor sending a tow truck to pick up a car right in front of the defaulted consumer’s home. The only limitation on self-help repossession is that it must be done without breaching the peace, which means without the use of violence or the threat of violence.
Once a creditor repossesses an item, it can auction the item off at a public or private sale. The sale must be reasonable in its time, place and manner. Basically, reasonableness means a creditor cannot sell a $20,000 car for a much smaller amount, such as $1,000.
If the creditor does not recover the balance of the defaulted loan as well as all of the reasonable costs it incurred because of the repossession, the creditor can go after the consumer for the difference. For example, if a consumer defaulted on a car with $10,000 left on the loan, the creditor repossessed and resold for $8,000 but incurred $2,000 in towing, storage and attorney fees, the consumer might be liable for a $4,000 deficiency.