When a person buys a vehicle in the state of Louisiana, it belongs to them and nobody can legally take it from them. Does that sound good? Well, it only applies if the buyer pays for the car out of pocket without a car loan. Anyone who finances a vehicle purchase in Louisiana transfers many rights to the lender, including the right to repossess that vehicle if the buyer defaults on the loan agreement.
Vehicle Purchase Liens in Louisiana
When an individual borrows money from a bank or other lender in order to buy a car, Louisiana law gives the lender the rights of a lien holder. The vehicle itself is the security for the loan. If the buyer doesn't pay on time or if they don't pay at all, the lender or their repossession agent can take possession of the car since it was collateral for the loan.
The law in Louisiana doesn't just apply to cars. Almost any financed vehicle will be collateral for the purchase loan. This includes cars, trucks, recreational vehicles, motorcycles and even boats and airplanes.
Repossession laws do not just apply to purchase loans, but also to any type of loan that uses the vehicle as collateral. That makes it important for Louisiana residents to understand the state laws about car repossession.
How Vehicle Purchase Liens Work
A vehicle purchase loan lien in Louisiana works very much in the same manner as a mortgage. Just like failure to make mortgage payments can trigger a foreclosure and sale of a home, failure to make timely car purchase payments can result in a repossession and sale. And it can happen a lot faster. Generally, lenders trying to foreclose on a residential mortgage must jump through time-consuming hoops that do not apply to car lenders.
Car lenders in Louisiana have the right to hold onto the certificate of title of a vehicle until the final loan payment is made. That means that a lender is actually the true owner of the vehicle during the time the loan remains unpaid. These rights are spelled out in detail in automobile loan documents.
The lender must also notify the buyer by mail of their right to take possession of the vehicle without further notice upon default. That notice must include this sentence:
“Louisiana law permits repossession of motor vehicles upon default without further notice or judicial process.”
How Auto Repossession Works in Louisiana
An auto purchase lender is truly sitting in the driver's seat when it comes to repossession, assuming they have first properly notified the lender of their repossession rights. When a borrower defaults on a vehicle purchase loan, the lender can immediately repossess the vehicle. That is, they must notify the buyer of the loan default, but no Louisiana law requires any additional notice before repossession; nor is any type of court hearing required.
While a lender has the right to repossess a vehicle when the buyer defaults on the loan, they still have to play by certain rules in Louisiana. That means that they can send out a tow truck driver to transfer the vehicle from wherever it is parked to the lender's property, but the repo company cannot:
- Act with any violence.
- Enter uninvited onto the buyer's property.
- Trick the buyer into bringing the vehicle into a shop.
- "Breach the peace" when recovering a vehicle, which includes taking a vehicle while the owner is present and protesting.
Understandably, most repossessions in Louisiana occur when a vehicle is parked outside on a public street. Generally, this is when the buyer is sleeping or at work.
Personal Property in Repossessed Vehicle
What happens if the debtor left their phone, briefcase or other personal property inside the vehicle? They are entitled to have this property returned. Within 10 days of the repossession, they must contact the lender and ask for the return of the items. The lender must immediately return the property following this request.
If the debtor does not make this contact within 30 days, Louisiana law presumes that the property has been abandoned. At that point, the lender has no further responsibility for returning the items or even securing them.
Redeeming the Vehicle
Louisiana repossession laws dictate that a lender must mail the borrower of a repossessed vehicle a written notice setting out the law about retrieving or redeeming their vehicle. This notice must inform the buyer that they have the right to get the vehicle back if they deal with the outstanding issues related to the vehicle repossession before the vehicle is sold.
A buyer whose vehicle is seized should read this notice carefully. It will tell them the amount that they must pay to get the vehicle back. The lender may require the buyer to pay off the default, but it can also require them to repay the entire loan.
Owners are also legally responsible for the fees involved in the repossession, including legal fees and storage fees. The lender is within their rights in Louisiana to require that the full loan amount and all fees and costs be paid to redeem the vehicle.
Louisiana Deficiency Rights of Lender
Creditors generally sell repossessed vehicles at public auction in Louisiana, but they can also make a private sale. In either case, the debtor may be held liable for any remaining amount of the loan balance after the proceeds of the sale are collected. For example, if the outstanding vehicle debt is $30,000, and costs total $7,500, a sale price of less than $37,500 will result in a deficiency.
After the sale of a repossessed vehicle, the lender must send the borrower a notice telling them of the sales price. This notice also informs the borrower of how much is owed and calculates any deficiency. Any sales proceeds are first applied to the actual expenses for repossession, followed by legal fees and other costs. Any remaining proceeds will be subtracted from the total auto loan debt.
Louisiana repossession laws allow the lender to collect the deficiency if the sales price did not cover the full balance of the loan. The buyer can defend against an action to collect the deficiency if they can prove that the vehicle sold well under market value.
Teo Spengler earned a J.D. from U.C. Berkeley's Boalt Hall. As an Assistant Attorney General in Juneau, she practiced before the Alaska Supreme Court and the U.S. Supreme Court before opening a plaintiff's personal injury practice in San Francisco. She holds both an M.A. and an M.F.A in creative writing and enjoys writing legal blogs and articles. Her work has appeared in numerous online publications including USA Today, Legal Zoom, eHow Business, Livestrong, SF Gate, Go Banking Rates, Arizona Central, Houston Chronicle, Navy Federal Credit Union, Pearson, Quicken.com, TurboTax.com, and numerous attorney websites. Spengler splits her time between the French Basque Country and Northern California.