Self Help Repossession Notices are Often Targeted:
The Louisiana Additional Default Remedies Act provides the “self-help” laws permitting creditors to repossess motor vehicles and motorcycles directly. This is a form of non-judicial repossession that creditors can do themselves. It can certainly save a creditor some court and legal fees, but certain steps must be carefully followed, especially if the creditor wishes to later pursue a deficiency judgment.
Basic requirements of repossession notices:
A number of notices or letters must be sent to the debtor in order to properly effect a “self-help” repossession and to later be able to sue the debtor for the remaining deficiency balance. These notices include the Notice of Intent to Sell (which is sent prior to taking possession), the Notice of Sale (which is sent after taking possession but before the collateral is sold), and the Notice of Deficiency or Notice of Disposition (which is sent after the sale or auction). Each notice has certain minimum requirements, but additional information is usually recommended to be included.
The Notice of Intent to Sell should at a minimum contain the following:
- The borrower’s name and last known address;
- A description of the vehicle that the lender plans to repossess; and
- A statement that reads, “Louisiana law permits repossession of motor vehicles upon default without further notice or judicial process.”
A Notice of Repossession should be filed with the Recorder of Mortgages within 3 days of the repossession and should contain the following:
- The debtor’s name, last known address, and birthday; and
- A description of the collateral repossessed.
If a deficiency judgment is going to be pursued, then a Notice of Sale should be sent to the debtor after taking possession. It is recommended that it contains as much detail as possible but should absolutely include a statement that the debtor may be liable for a deficiency balance. After the sale a Notice of Deficiency, also known as a Notice of Disposal or Notice of Disposition, should be sent itemizing the costs of the sale and how much the debtor’s account was credited. Again, it is recommended that it be as detailed as possible to avoid the following problems.
Bankruptcy and debtor’s attorneys often target these notices in class action lawsuits. Lack of detail in the notices can cause banks and credit unions to waive deficiency balances, return payments towards deficiency balances, or even pay damages. Namely, debtors may challenge whether the Notice of Sale informed the borrower that they have a right to redeem the collateral prior to sale; whether the Notice of Sale adequately informs the borrower that they may be liable for a potential deficiency balance; whether the borrower was informed that they may attend the sale or auction; and whether the Notice of Disposition accurately outlines how the net sale proceeds were calculated and what the remaining deficiency balance is.
Another common challenge is whether deficiency notices mention possible future debits, credits, charges, interest, rebates, and expenses which affected the amount of the deficiency.
Risk mitigation for repossession notices:
Lenders should consider the following when sending repossession notices:
- Understand your state’s laws to ensure that all requirements are satisfied;
- Review letters and notices to ensure they are compliant;
- When sending notices to borrowers in other states, consider that state’s requirements;
- Train employees to properly draft notices;
- Periodically audit your notices to ensure they are compliant.
Louisiana creditors’ rights attorneys:
We are a Gretna law firm that has served the New Orleans area since 1980. Our experienced creditors’ rights lawyers are well versed at handling repossessions throughout Louisiana and pursuing deficiency judgments. We take pride in offering an effective and efficient experience. Call us today for a free consultation and find out why so many of our clients come back to us.