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Repossession Laws in New York

If a consumer is in a loan agreement and their creditor has a security interest in the good used as collateral, failure to make a loan payment could give the creditor the right to seize that good. This is known as repossession. While there are laws that outline the rules regarding repossession, they vary from state to state. Understanding New York’s state-specific laws may help to protect consumers against repossession companies if they find themselves being faced with repossession.

Is breach of the peace illegal in New York?

Yes. In New York, a repossession may not be carried out if the act will breach the peace. Breach of the peace is a term that refers to acts of disorderly conduct and is regarded as a criminal offense if broken. While a repossession company can execute a repossession at any time they like, this provision restricts the company’s actions and if broken, it can render the repossession illegal. When attempting to repossess a consumer’s vehicle, the repossession company is not allowed to use violence or threats to force them into giving up their vehicle. They cannot physically harm an individual in any way. They also should not intimidate consumers into giving up their vehicles—they cannot give consumers false information about the repossession and they cannot use police aid to help them fulfill their job as police intervention would cause the act to be illegal. Additionally, the company cannot break into a closed garage if they suspect that a consumer’s vehicle may be in it. Essentially, a repossession should not harm an individual’s well being or damage their property. At any time during a repossession, if a consumer protests the company’s actions and asks them to leave their property, the company should do as the consumer asks because carrying on with a repossession after hearing their objections could be unlawful on the company’s end.

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

No. While some companies may choose to send consumers a pre-repossession notice, they are not legally obligated to do so and they are entitled to repossess vehicles at any time after consumers have missed loan payments.

What can a consumer do after repossession has occurred?

Even if a vehicle has been repossessed, there are still guidelines that the creditor has to adhere to after the act and the consumer may still be able to take back their vehicle from the creditor.

After the repossession has occurred, the creditor must send the consumer a notice of the repossession within 24 hours of its occurrence. The notice should also include information about the amount of debt that the consumer owes and what the creditor plans to do with the vehicle. The letter should either be delivered in person or by first class mail. The creditor also has to provide a notice to the local motor vehicle district office with the name and address of the repossession company that seized the vehicle.

The creditor cannot dispose of or keep any of the consumer’s personal items that may have been inside of the vehicle during its repossession. They should let the consumer know where the vehicle is being stored so that they can retrieve their property.

If the consumer has paid off 60 percent or more of their loan, the creditor has to sell the vehicle within 90 days. However, if the consumer has not paid off at least 60 percent of their loan, the creditor can choose to keep the vehicle instead of selling it. The creditor can determine whether to sell the vehicle at a public auction or private sale. Once the creditor sets up a sale, they have to send a notice to the consumer that informs them of the time and place of the public sale or the date after the private sale. At any time before the sale, they can cure the default by paying back their debt plus any reasonable fees accumulated by the creditor during the repossession or preparation of the sale. If the consumer is able to pay off the full amount, they can reclaim the vehicle back from the creditor, their rights under the original loan will be restored, and they will no longer be in default.

During the sale, the creditor must ask for a commercially reasonable price as asking for a price that is lower than the vehicle’s average market value could be unlawful. After the sale is finished, the creditor must send the consumer a post-sale notice that tells them of the selling price of the vehicle and how much they may still owe on their balance. The money from the sale must first be applied towards any expenses collected by the creditor during this process. The remaining amount should then be applied to the consumer’s debt. If the sale of the vehicle cannot fully cover the total balance, the consumer could still be liable for owing the difference. However, if the funds from the sale can cover the balance and there is still money left over, the creditor has to return the excess to the consumer.

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

If a creditor did not follow the appropriate provisions when repossessing a consumer’s vehicle, this could indicate that the vehicle was wrongly repossessed. The vehicle’s repossession may have been unlawful if the consumer did not receive notice of the repossession or if they were not provided with a pre- or post-sale notice. If any of these cases occurred, the consumer may not have to pay their remaining debt (the deficiency balance). Furthermore, if the repossession company breached the peace while taking the vehicle, the repossession may have been illegal. In this case, the consumer could be protected by the Fair Debt Collection Practices Act (FDCPA), a federal law that places limitations on the actions of debt collectors in order to better protect consumers. Pursuant to the FDCPA, the repossession company could owe the consumer a compensation of up to $1,000 in statutory damages if they conducted an illegal repossession. The consumer’s legal fees and any costs could be covered in accordance with the act as well.

Where can a consumer look for help or for answers to their questions?

A consumer protection agency in the state that a consumer lives in, their 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 receiving assistance and/or determining the answers to their questions in regard to the aforementioned laws. The Consumer Financial Protection Bureau can help consumers as well.