Post Repossession Notice and New Jersey Law

Under the sale and lease of automobiles, there is no requirement that the finance company place the driver of the vehicle on notice. Quite simply, if you are 10 minutes late for your payments on a leased or a purchased vehicle, the finance company is permitted to repossess same within their contractual limitations. This means that if the finance company provides a 15-day grace period, they would not be able to repossess the vehicle until the expiration of the 15-day grace period. This is one of the most common questions asked for those clients with repossession questions.

However, once the vehicle has been repossessed, the rules are somewhat different for leases and purchases. On a lease, the lessee, the driver, would have at least one opportunity to make good on past due payments. This would be during the entire term of the relationship between the lessee and the finance company. The same “get out of jail free” card would not apply to the purchase of vehicles. If you purchase the vehicle and it is repossessed, the finance company is not required to permit the opportunity to make good on past due payments. They can insist on complete payoff of the vehicle and nothing less.

Under both the repossession of leased and financed vehicles, the finance company is required to place the lessee or owner on notice of the potential sale and provide a post-repossession accounting of the relationship. There are some exceptions to this; however, as a general matter, the Uniform Commercial Code specifically delineates the post-repossession requirements.

There are laws in New Jersey that strictly regulate the repossession and resale of repossessed automobiles. The most common misunderstanding is that a finance company is required to give notice of repossession. This is not true on purchases but is true on leases. The finance company is required to give notice of the amount due and the date of the sale of the vehicle to give the consumer a chance to buy the car. The vehicle must be resold in a commercially reasonable manner. After the car is resold the finance company has the right to sue the owner for the amount due on the loan, but the finance company is required to provide an accounting of the finances of the sale and the amount due for the subject vehicle. If the consumer is sued the only real defense is a breach of warranty defense that the car was not working properly or in violation of any applicable warranties, expresses or implied.

As previously set forth, there is no notice required under most circumstances prior to the finance company retaking possession of this vehicle. However, after a vehicle is in the possession of a finance company, there are at least two notices required. The initial notice is a Notice of Resale Date. The intent and purpose of this notice is to give the consumer the appropriate opportunity to inspect the vehicle, make sure the resale is proper, attend the auction or private sale site and make appropriate bids to potentially minimize their damages. If the consumer feels they are in a better position than most purchasers, they can repurchase the vehicle and thus potentially minimize their losses. The other guarantees are to assure that the consumer can appear at the sale and make sure all is done in a commercially reasonable manner. This would be the primary purpose for the presale notice. If the finance company or the company responsible for sending this notice failed to do so, failed to properly give them information to permit the consumer to investigate the sale, they would be deemed a violation of the Uniform Commercial Code or potentially a violation of the New Jersey Consumer Fraud Act, for which the plaintiff would be entitled to damages.

After the vehicle is sold, there is another set of notices that are required to be sent by the finance company, which would in essence be an accounting of the transaction. This is to assure that a consumer is knowledgeable of his/her complete and total liability for the ultimate breach of the retail installment sales contract, which led to the repossession of the vehicle. There has been a recent change to the Uniform Commercial Code and there are specific requirements with regard to what must be reported to a consumer. The consumer must be able to determine the exact nature and extent of liability to the finance company for breach of the lease agreement or the purchase agreement. The finance company’s failure to appropriately send the post-repossession notice would be deemed an improper repossession and actionable under the Uniform Commercial Code or potentially actionable under the New Jersey Consumer Fraud Act, depending on the nature and extent of the inappropriate disclosure.