February 26, 2002
REDEEMING A REPOSSESSED MOTOR VEHICLE
By: Daniel Duffy, Principal Analyst
You asked if state law gives a motor vehicle purchaser whose car has been repossessed by the lender the right to redeem the vehicle.
The law prescribes procedures that lenders must follow to repossess goods. Under it, a lender that does not give at least 10 days notice prior to repossessing goods must give the buyer a right to redeem them.
The law establishes a procedure to repossess goods. If the buyer defaults on his payments, or fails to perform other contractual obligations and the contract expressly makes the obligation a ground for retaking the goods, the contract holder may repossess the goods. Unless the goods may be taken without breach of peace, they must be retaken following legal process. The law specifies that it must not be construed to authorize violating criminal law. If a motor vehicle is repossessed without the buyer's knowledge, the contract holder must notify the local police department or the state police, as appropriate (GGS § 36a-785(a)).
Notice of Intent to Repossess
The law allows a contract holder to notify the buyer of the intention to retake goods due to the buyer's default. The notice must be given at least ten days before repossession and may be delivered personally or by registered or certified mail. It must state (1) the default, (2) the date after which goods will be repossessed, and (3) the buyer's rights in a brief and clear way. If the notice is given and the buyer does not act to remedy the default before the stated deadline, the contract holder may repossess the goods and hold them for resale, but without a right of redemption (GGS § 36a-785(b)).
If the contract holder does not give the notice of intent to repossess, he must keep the goods in the state where they were repossessed for 15 days. During that period, the buyer may redeem the goods, take possession of them, and continue to perform his obligations under the contract if he (1) pays the unaccelerated amount due under the contract at the time of repossession plus interest or performs a contractual obligation stated in the contract as grounds for repossession and (2) pays the actual and reasonable costs of repossession and storage.
The contract holder must, within three days of repossession, provide the buyer with a written statement of the amount due under the contract and the amount due for repossession and storage costs. If the contract holder fails to provide this notice, he forfeits his right to payment for repossession and storage costs and is liable for actual damages caused by that failure.
If the goods are perishable and cannot be kept for 15 days without destruction or substantial injury, these requirements do not apply and the contract holder may sell the goods immediately after repossessing them (GGS § 36a-785(c)).
The contract holder must sell repossessed goods if the buyer does not redeem them. The sale must be held from 15 to 180 days after repossession and may be public or private. If the goods were repossessed through legal process, and an answer is interposed, the contract holder may hold the goods for up to 30 days after the final judgment is entered. The contract holder must give the buyer at least 10 days written notice of the time and place of a public sale or when a private sale or other disposition will take place. The notice may be given personally or by registered or certified mail. The proceeds of the resale must be considered as either the amount paid for the goods or the fair cash retail market value at the time of repossession, whichever is greater (GGS § 36a-785(d)).
Resale proceeds must be applied (1) to pay the actual and reasonable costs of the sale, (2) to pay repossession and storage costs, and (3) to satisfy the balance due under the contract. The contract holder must give the buyer a written itemization of how the proceeds are disposed. If any money remains after the claims are paid, the contract holder must give it to the buyer (GGS § 36a-785(e)).
Deficiency after Resale
Even if the proceeds are not enough to pay the above costs, the contract holder may not recover the difference from the buyer or any surety or guarantor for him, except as described below for certain motor vehicles and boats (GGS § 36a-785(f)).
Fair Market Value of Motor Vehicles and Boats
If the contract holder repossesses a motor vehicle with an aggregate cash price greater than $2,000, the prima facie fair market value is calculated by adding the average trade-in value and the average resale value and dividing the sum by two. The average values must be determined according to the National Automobile Dealers Association Used Car Guide, Eastern Edition, as of the date of repossession. The fair market value of boats with an aggregate cash price greater than $2,000 must be calculated in the same way, except the average values must be taken from the National Automobile Dealers Association Appraisal Guide for Boats, Eastern Edition. If the value of the motor vehicle or boat is not stated in the guides, the court must determine the fair market retail value minus reasonable resale costs. Prima facie evidence of value so determined may be rebutted only by direct in-court testimony.
If the fair market value of these motor vehicles and boats is less than the balance due plus repossession costs, the contract holder may recover the difference as a deficiency from the buyer (GGS § 36a-785(g)).
Choice of Remedies
If the contract holder repossesses goods or obtains a prejudgment remedy, the buyer is not liable for the balance due, except to the extent described above for certain motor vehicles and boats. If the goods have not been repossessed, the contract holder may seek a monetary judgment against the buyer. Goods purchased under contract cannot be used to satisfy such a judgment. When a judgment is final, the holder's security interest in the goods terminates. If the contract relates to a sale of a motor vehicle that must be registered, the contract holder must comply with motor vehicle law concerning the release of a security interest (GGS § 36a-785(h)).
Recovery of Part Payments
The law allows a buyer to recover the greater of his actual damages, if any, or 25% of the amount paid under the contract, if a contract holder repossesses goods and fails to comply with the law concerning redemption, compulsory resale, resale proceeds, deficiency after resale, determining the fair market value of certain motor vehicles and boats, or the choice of remedies (GGS § 36a-785(i)).
Waiver of Statutory Protection
The law makes invalid any act or agreement made before, or at the time of, entering a contract in which the buyer waives the law's provisions concerning redemption, compulsory resale, resale proceeds, deficiency after resale, determining the fair market value of certain motor vehicles and boats, the choice of remedies, or the recovery of part payments (GGS § 36a-785(j)).
Risk of Loss
By law, the buyer bears the risk of loss or injury after the goods have been delivered and before any repossession (GGS § 36a-785(k)).