RANCHO CUCAMONGA, Calif. -
The California Court of Appeals for the Fourth Appellate District ruled every repossession sales notice governed by the Rees-Levering Motor Vehicle Sales and Finance Act must contain specific information that previously was not delineated in the applicable code section. The decision affects not only California CUs but also CUs that are domiciled elsewhere but do business in California.
The Rees-Levering Act pertains to conditional sales contracts for motor vehicles, and CCUL said indirect auto lending programs are subject to the act if they use conditional sales contracts. Provisions include a requirement for defaulting debtors to have the opportunity to pay the balance due to redeem their vehicles, and it states creditors must provide the defaulting debtor with a notice of intention (NOI) to dispose of the repossessed vehicle. The act further requires the NOI set forth "all the conditions precedent" to reinstatement.
Chris Collver, regulatory analyst for the California and Nevada CU Leagues said the potential exists for plaintiffs' attorneys to seize upon the ruling and create trouble for credit unions.
"Attorneys are very creative, and they could contest every repossession notice presently pending-and even those issued in the past-by claiming the notices did not supply sufficient detail to debtors," he explained. "There is a potential for a lot more lawsuits. And not just in the Fourth District, anyone can cite this argument now."
Eric North of the law firm Moore, Brewer, Jones, Tyler, offered some advice regarding the act. Among the highlights, all NOIs must:
* State exactly how much must be paid to cure any default and reinstate the loan.
* Disclose whether any additional charges will become due during the reinstatement period and, if so, the amounts of those additional charges and the dates they become due. Said North in the e-mail, "It appears that information must be given which will allow the borrower to determine the amount due on any given date."
* Include the name and address of everyone to whom reinstatement payments must be made, including law enforcement if the vehicles was towed and/or impounded.
The CCUL and several other concerned parties have taken action to have the opinion depublished, a discretionary power of the state suppreme court that would prevent the decision from becoming binding in the Fourth District, and would prevent others from citing it as legal authority.
"We cannot unring the bell. Regardless of how the depublication effort goes, outside of the Fourth District of California other attorneys could bring up the argument," Colver said. "If notices are found to be too general and do not have these specific provisions, if they do not spell out what must be paid by a given date, there is a potential for repossession sales to be overturned."
Collver said all CUs involved in indirect auto lending in California should consult with their attorneys, because even if the depublication effort is successful the argument could be used in other districts. The most drastic option: suspend all auto loans. Collver said at a minimum, CUs should review and possibly revise their repossession sales notices with their attorneys.
