N.C. Bankers Seek Rewrite To Fix Vehicle Seizure Law

Moving to protect their auto-loan portfolios, bankers are rushing to rewrite a North Carolina law that takes cars away from drunken drivers and gives them to schools.

The well-intentioned law, which took effect Dec. 1, empowers local school districts to sell the seized cars and keep the profits. But many cars are piling up in storage lots-losing value and vexing auto lenders.

"What we're trying to do is make sure the school boards get their money and make sure we get our money," said James S. Lofton, president of the North Carolina Association of Financial Institutions, a group of the state's largest banks.

Designed as a way to solve two problems with one piece of legislation, the law allows enforcement agencies to seize the vehicles of drunken drivers whose licenses were revoked for earlier drunken-driving offenses. After the cars are seized, they are turned over to the schools.

But problems became apparent soon after the law took effect. Everything from old Chevys to modern minivans started piling up-sometimes racking up hefty storage fees at impoundment lots-while the schools waited for the drunken-driving convictions that were needed to free the vehicles for sale.

As of April 30, the most recent date for which the numbers were available, more than 2,337 vehicles had been turned over to the schools, said Leanne Winner, director of governmental affairs for the North Carolina School Boards Association. But only one has been sold.

For auto lenders, every day that ticks away after a car is seized means a loss in their collateral's value and an escalation of charges that eat into equity.

Both large banks and small banks are seeking relief.

"This whole thing was designed to take the cars away from drunks and make some money for the schools, said Paul Stock, vice president of the North Carolina Bankers Association, or NCBA, a community bank group.

"But the schools are losing money right now because they're not selling any cars. The cars are just sitting in impound lots and the storage is eating up the value."

Bankers and other interested parties have drafted an amendment to the law that would make it easier and quicker for lienholders to take possession of their vehicles, both before a drunken driver is convicted and after.

Another important change would give lienholders some protection against potential lawsuits by drunken-driving offenders who want their cars back. The amendment also includes a provision for a private contractor to handle storing and selling many of the vehicles.

The amendment's drafters presented their proposal to the state Senate Judiciary Committee on Tuesday. Supporters hope for a vote in the next several days.

Like the banks, the schools are seeking some relief because they do not have the resources to handle the storage and sale of the vehicles. If not corrected, the system for seizing, holding, and selling the cars will mushroom into a huge headache for the school system and a financial pothole for lenders, supporters of the amendment said.

Jerry T. Myers, a Raleigh, N.C., lawyer representing Ford Credit and Chrysler Finance, said his clients and the banks they have been working with on the amendment are optimistic the changes will be made.

"The law has so much appeal," he said. "Who can argue against taking vehicles away from impaired drivers and helping out schools? The problem was, the devil was in the details."

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