Most car loans include provisions in case you miss payments and eventually default on the loan. With a defaulted loan, the creditor generally has the right to take your vehicle to recoup their lost funds. A creditor may do this by selling the car outright, leasing it to another driver or by a variety of other legal means.
What kind of repossession is legal?
Minnesota allows the repossession of vehicles if that repossession is carried out peacefully. The federal regulations under the Fair Debt Collection Practices Act (FDCPA) does not apply in most cases to car repossession and those companies that practice it. There are, however, some exceptions in which a vehicle repossession can constitute an FDCPA violation:
- The ‘debt collector’ is prohibited from enforcing a non-judicial repossession of property if there is no security trust on the property.
- There are some scenarios in which a vehicle may be exempt from repossession, such as in some Chapter 7 proceedings.
- If the company didn’t have an intention to repossess the property in question, it wouldn’t necessarily have a right to collect that property without a court order.
The consequences of defaulting on a loan
Many unfortunate life circumstances can lead to a defaulted loan. Maybe you’re in between jobs, owed money by an employer, or, if you own a business, have a client who refuses to pay you over a business dispute. Whatever the reason, your vehicle is vital to your livelihood, so it’s essential to know your rights when it comes to creditor repossession.
Protecting your property from unscrupulous debt collectors
The FDCPA protects consumers from unreasonable or threatening tactics by debt collectors to coerce consumers to pay debts. While the use of these protections in the repossession of vehicles is relatively limited, you should contact a lawyer with experience in FDCPA laws to determine if a debt collector’s practices constitute a violation.