Repossession Laws in New Jersey
If a consumer has an active loan agreement with the creditor but fails to make a payment, they will enter into default. If this occurs and the creditor has a valid security interest in the item used as collateral, they are entitled to conducting a repossession of that item. Fortunately, every state has laws that work to protect consumers from creditors and third-party repossession companies. Being aware of New Jersey’s specific laws can help the consumer if they find themselves facing repossession.
Is breach of the peace illegal in New Jersey?
Yes. In New Jersey, while repossession companies are allowed to repossess a consumer’s vehicle at any time or date after they are in default, they are not allowed to breach the peace while doing so. A repossession that breaches the peace is considered unlawful. Since breach of the peace is a general term, there are many actions that a repossession agent can do that will violate this act. For example, when attempting to repossess the vehicle, a company cannot pose a risk to the consumer’s well being when carrying out a repossession. They cannot physically harm the consumer or threaten them into giving up the vehicle. Furthermore, they cannot force their way onto the consumer’s property by entering a locked gate or breaking into a closed garage. A properly conducted repossession should not damage their property. Sometimes, repossession companies will perform repossessions at night when the owners are sleeping but if the consumer wakes up and finds that their property has been damaged, it is possible that a breach of the peace occurred. If the consumer is present for the repossession and they ask the company to leave their property or object to their actions, they should do so, as non-compliance with their explicit objections can also be a breach of the peace.
Is a pre-repossession notice required to be sent to a consumer?
No. In New Jersey, creditors are not required to send a notice before they proceed with a repossession. However, in order for a lawful repossession to be conducted, the consumer has to be in default and the creditor has to have a valid security interest in the vehicle.
What can a consumer do after repossession has occurred?
After repossession has occurred, the creditor still has to follow a set of rules regarding the rest of the repossession process.
If the consumer was present during the repossession, the company should have let them take out any personal items that might have been inside of the vehicle. However, if the consumer was not present for the repossession, the creditor should provide them with the location of the vehicle so that they can redeem their items.
Following the repossession, the creditor must also send the consumer a Notice of Repossession and Right to Redeem letter by mail. The notice should be sent promptly after the vehicle was taken in order to inform them of the repossession. It should also contain information about the amount of money that the consumer owes, how to redeem the vehicle, and the creditor’s plans for the vehicle. They must provide the consumer with a reasonable amount of time to reclaim the vehicle—this is usually between 10 and 14 days. The notice should also provide a contact number for the creditor. In New Jersey, if the consumer has paid off at least 50 percent of their total loan, the creditor must resell their vehicle, but if the consumer has not paid at least 50 percent, the creditor can opt to keep the vehicle. In the event of a sale, the creditor can choose whether they want it to be public or private, but either way they must provide the consumer with the details of the sale (i.e. date, time, location).
At any time before the vehicle is sold, the consumer has the right to redeem it. If the consumer can pay off the debt that they owe, as well as any reasonable expenses that may have been collected by the creditor during the repossession, they are entitled to receive back the vehicle. If they are able to do this, they will no longer be in default and they will be reverted back to their rights under the original loan agreement.
The creditor must ask for a commercially reasonable price during the sale of the vehicle. Any price that is significantly lower than the average market value of the vehicle could be an indication of unlawfulness by the creditor. After the sale has occurred, the creditor must then send the consumer a notice of deficiency. This notice should inform the consumer of the vehicle’s selling price and whether or not they still owe any money on the loan. The proceeds of the sale should first be applied to any costs accumulated by the creditor in repossessing their vehicle and setting up the sale, and the amount that remains should then be applied to the consumer’s debt. If there is a surplus of funds after everything has been paid for, the creditor should give the profit to the consumer. However, if the money from the sale was not enough to cover the total amount of expenses plus their debt, the consumer may be held responsible for paying the deficiency (the balance that still remains on their loan).
What happens if a consumer’s vehicle was wrongly repossessed?
If the creditor did not comply with New Jersey’s provisions regarding repossession, it is possible that the consumer’s vehicle was wrongly repossessed. For example, if they did not receive a Notice of Repossession and Right to Redeem or a post-sale notice from their creditor, the vehicle’s repossession may have been unlawful. If this is the case, the consumer may not need to pay the deficiency balance. Additionally, if the repossession company breached the peace while repossessing the vehicle or if they repossessed the wrong vehicle that they had no right to take, they could have violated the Fair Debt Collection Practices Act (FDCPA), a federal law that protects consumers from debt collectors. If either of these situations occurred, pursuant to the act, the consumer could be entitled to a compensation of up to $1,000 in statutory damages to be paid for by the repossession company and their legal fees and any costs could be paid for as well.
Where can a consumer look for help or for answers to their questions?
A consumer protection agency in the state that the consumer lives in, the state’s Office of the Attorney General, and/or a consumer protection attorney who is licensed in a consumer’s respective state can help a consumer in getting help and/or determining the answer to their questions in regard to the aforementioned laws. The Consumer Financial Protection Bureau can assist as well.