Laws for Auto Repo

By Sherrie Scott
Auto finance and lease companies are subject federal and state repossession regulations.
towing truck image by Aleksandr Ugorenkov from Fotolia.com

Auto creditors have the right to repossess a vehicle without notice if the car’s owner does not make timely payments or comply with financing terms. Certain laws exist on a state and federal level that are related to vehicle repossessions and what a creditor must do before and after they take the car away. These laws protect the rights of consumers and provide rules that creditors and lessors must abide by to legally repossess a vehicle.

Auto Retrieval

According to the Federal Trade Commission, “a creditor can seize your vehicle as soon as you default on your loan (Reference 2).” In some states, a creditor can repossess a vehicle if the owner fails to maintain valid auto insurance. Creditors have the right to come onto a consumer’s property to repossess a vehicle at any time without notifying the owner. Most states suggest that vehicle repossession practices become illegal when seizing the vehicle causes a “breach of the peace (Reference 2).” A breach of peace is considered the use of physical force, threats, or entering the vehicle owner’s home without his permission.

Notification Requirements

In most states, creditors are required to notify vehicle owners what they intend to do with a vehicle after it has been repossessed. Some creditors keep the vehicle in hopes of receiving payment for it. Other creditors may decide to sell the auto. Laws regarding the sale of a repossessed vehicle require the creditor to notify the vehicle’s owner of the intent to sell the car. Vehicles may be sold at a public auction or through a private sales process. Public sales often require the creditor to make an announcement of the date and time of the proposed sale so the car owner has the opportunity to bid on the vehicle.

Consumer Protection

Local consumer protection agencies support the rights of consumers against the unjust practices of businesses and other organizations. Offices such as the state attorney general's investigate complaints made by consumers regarding illegal seizures of vehicles by creditors. For example, if while repossessing a vehicle, a consumer’s personal property was damaged, the consumer has the right to file a complaint to collect for damages. Also, it is against the law for a creditor to keep personal property left inside of a repossessed vehicle. The creditor is responsible for letting the consumer know what items were inside the car at the time of repossession and where they can be picked up. Creditors must also take care not to damage the consumer’s personal belongings.