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Repossession Laws in Minnesota

When an individual falls behind on loan payments for a vehicle, the creditor can take back, or repossess, the item used as collateral. Although this is a difficult situation, every state has different laws that can protect a consumer against their creditor or third-party company during the process of repossession. If a consumer’s vehicle has been repossessed, familiarizing themselves with Minnesota’s laws on repossession can help them handle this situation.

Is breach of the peace illegal in Minnesota?

Yes. A repossession company can come take a vehicle at any time of the day without notice but they must not breach the peace while doing so. In Minnesota, breach of the peace is illegal if it occurs before a vehicle is taken. A criminal offense if broken, breach of the peace is a term used to limit the actions of a repossession company. Under this provision, there are many actions that a company cannot take when confiscating a consumer’s vehicle. For example, repossession agents cannot be a risk to a consumer’s well being when carrying out a repossession. Thus, they cannot use force, be violent, or threaten an individual into giving up their vehicle. Furthermore, the agents cannot damage a consumer’s property or remove their vehicle from a closed garage. If any of these acts occur, the repossession can be considered as unlawful. If the repossession company continues to attempt to seize a vehicle after a consumer objects to their actions, this may be seen as a breach of peace. Additionally, the repossession company should not enlist the help of police. Police engagement in a repossession can also render it unlawful.

Is a pre-repossession notice required to be sent to a customer?

Yes. In Minnesota, if a creditor has been repeatedly accepting late loan payments from a consumer without ever previously repossessing the vehicle, they must send the consumer a notice called a “Cobb Letter” if they now want to repossess their vehicle. The “Cobb Letter” essentially acts as a warning. A creditor’s previous actions of taking late payments is an indication that the original rights under the loan agreement may have changed. For this reason, they must provide the consumer with the letter in order to inform them that they must comply with the original due date and that if they do not provide payment by the agreed upon date, their vehicle could be repossessed. Therefore, if the creditor has accepted late payments in the past, lawful repossession cannot occur if they have not sent the consumer a Cobb Letter.

What can a consumer do after repossession has occurred?

After repossession has occurred, a creditor still has to comply with state provisions regarding the post-repossession process.

Following the repossession, the creditor should let the consumer know where the vehicle is so that they can recover any personal items that may have been inside of the vehicle at the time of the repossession.

In Minnesota, if a consumer has already paid off at least 60 percent of their total loan, the creditor has to sell their vehicle in either a public or a private sale. If a consumer paid less than 60 percent of the loan, the creditor can choose to keep the vehicle but they have to provide the consumer with a notice of their actions. Consumers are then given a period of 30 days to object to this notice and request a sale. If they do not object, the creditor will keep the vehicle.

If a sale is to occur, the creditor has to resell the vehicle within 90 days of repossession. They should send the consumer a pre-sale notice that informs them of the time and date of the sale, as well as how the vehicle will be sold. This notice should also provide the individual with the amount of money that they still owe, which will most likely be the sum of their balance and any reasonable fees that the creditor accumulated during the repossession process. If they can pay off this amount before the sale occurs, they will be able to receive their vehicle back and their rights will be reestablished under the original loan agreement. During the sale, the creditor must ask for a commercially reasonable price for the vehicle. The final auction price of a vehicle usually meets the standards of “reasonable.” However, if the creditor asks for a price that is significantly lower than the average market value of the vehicle, this could be an indication that the creditor committed an unlawful act. After the sale occurs, the creditor must then send the consumer a post-sale notice that includes the price the vehicle sold for and the outcome of their balance. The proceeds of the sale should first be applied to reasonable expenses accrued by the creditor and the remaining amount should be applied to the debt. If there are any funds remaining after the debt is paid off, the creditor should return this money to the consumer. However, if the sale of the vehicle is not enough to cover their loan balance, the consumer could still owe a deficiency balance (the amount of the debt that remains).

What happens if a consumer’s vehicle was wrongly repossessed?

It is possible that the creditor or the repossession company did not comply with the correct rules when seizing a consumer’s vehicle—an unlawful repossession may have occurred if they were not provided with a valid Cobb Letter or if they were not sent notices regarding the sale of their vehicle post-repossession. If a creditor did not adhere to these provisions, it is possible that the consumer will not have to pay the deficiency balance. Additionally, if the vehicle was illegally repossessed due to a breach of the peace, the consumer could be protected under the Fair Debt Collection Practices Act (FDCPA), which is a federal law that provides legal protection for consumers by placing restrictions on a debt collector’s practices. In the event of an illegal repossession, pursuant to the FDCPA, 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 funded 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, their respective 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.