Written by Holly Balogh – President: RISC
Education is paramount to protecting yourself from liability in several different areas of the repossession process. When it comes to personal property, the rules vary by state and some states have specific regulations. Unfortunately, lenders may unknowingly put themselves at risk for fines if they are unaware of these unique laws. As an example, a few months ago, the Consumer Financial Protection Bureau (CFPB) documented a ruling against a large National Creditor for a number of infractions including personal property issues that spanned three years. The hefty penalty included a violation because the repossession agents, with the creditor’s knowledge, “demanded that consumers pay a separate, upfront storage fee for personal property contained in repossessed vehicles. These agents refused to return consumers’ personal property until the consumers paid the fee.”
This recent case should open the eyes of everyone involved in the repossession process, including the financial creditors making the loans, the repossession agents completing the repo process, and the consumer who has the rights to protect him or herself during what has to be a very difficult situation. An issue, that perhaps exacerbates the ability of the industry to ‘do the right thing’ when it comes to dealing with personal property, are the multiple different state laws across the United States.
The CFPB has made it clear that a repossessor cannot hold personal property hostage in lieu of payment but if someone is willing to pay, then there is no issue. In the State of Florida by State Statute 493, agents are allowed to charge for personal property storage. This can be confusing as some lenders allow fees to be charged, some do not, and some pay the agency to give personal property back in lieu of collecting fees from the consumer. Ultimately, an agency must understand what their lenders allow and ensure they are appropriately compensated for their own internal costs for managing, maintaining, and supporting the personal property found in repossessed vehicles. As demonstrated in the recent CFPB case, the actions of the agent fall under the responsibility of the creditor for whom they are repossessing. In today’s COVID-19 world, these costs are higher and support is needed now more than ever.
Here is a little quiz. What do the States of Alaska, Arizona, and Alabama have in common? Besides starting with the letter A, they do not have any specific laws for how to handle personal property. Therefore, federal law must be adhered to. Here is another one. What state requires a notification that the repossession agent is in possession of personal property? If you guessed Indiana, you got it right. Here is another, what state has a requirement for special treatment for medical devices in the vehicle? If you guessed Maine you would be right again.
As you can see from these few examples, some states, ten in all, have very unique and specific personal property requirements. RISC has taken a key step to support the industry and help all parties understand what rules must be followed. In partnership with Hudson Cook, LLP, RISC has outlined the details of personal property laws state-by-state in this FREE Report. This report outlines the latest regulations as of February 2021. Print these laws out, review them, ensure that your agencies understand them. Doing so will help you take a big step forward in ‘doing the right thing’ and following the law related to how to handle personal property during the repossession process.