After the killer Covid-19 virus came into our streets last year, millions of Americans lost their jobs in the process. It’s true some people were using the relief stimulus package from the temporary federal programs to settle their current loan obligations. But then, did the creditors have the right to go after the loan defaulters? And for the auto loans, can my car be repossessed right now during the pandemic if I’m late on my monthly payment?
Although we might be a little late, this will be our topic today. We’ll first introduce you to the auto repossession laws before and during the Covid-19 pandemic. Then, we finalize how you can avoid repossession claims without destroying the good relationship with your lender.
The Auto Repossession Laws before Covid-19 Pandemic
First, we all know cars, especially new ones, can be expensive to own here in the US. Hence, the reason many people opt to secure bank loans or look for the best car dealerships they can afford.
Unfortunately, the dealerships and lending institutions know it’s not all the time your regular income and the monthly bills will pan out. Hence, the reason we have vehicle recovery companies and their agents in play.
Well, indeed, even the Federal Trade Commission provides that your lender has the right to take your car if you fail to make the payments on time. Worst, they can take it without having to go to court or telling you first. That’s what we said when discussing whether the Repo man can move another car to get to yours. So, you might be surprised the lender, or rather repo man came and “jacked” your car from the parking lot of your store.
Regardless, different US states have different laws regarding secured transactions, like an automobile loan. The collateral (financed item) recovery upon default allows peaceful repossession across all regions, but the redemption policy varies with each state.
For instance, the California Civil Code Section 1812.2 states that the seller (or assignee) has the right to repossess the collateral to recover the balance due. The seller should give notice to the borrower, who will have ten days to redeem the property before disposition.
Note, states like Ohio and Delaware will give you a redemption period of fifteen days before the disposition of the collateral. However, the largest number of states doesn’t have an exact number of days, which means you have to act fast before the disposition of the collateral.
The Automobile Repossession Laws during Covid-19 Pandemic
After the Covid-19, or rather Coronavirus moved from an endemic to a pandemic, various states issued a temporary halt on repossession. There are lenders who also voluntarily forego repossessions, and not just on automobiles but also on other types of loans. If you were keen on the financial news, many institutions announced various options to help the affected consumers cope with financial hardships. This included the possibility of lowered installment payments, waived late payment fees, and temporary low-interest rates.
Furthermore, some auto lenders worked in hand with the national credit bureaus to list the accounts of their loyal clients in forbearance and deferment. Hence, minimizing a negative impact on their positive credit score.
Regardless, the lenders cannot know you’re experiencing COVID-19-related financial hardship until you inform them. So, you had to communicate with them beforehand so that they can assess your situation and provide a workable solution for both of you.
Some dealerships even established designated COVID-19 resource centers that exclusively cater to the impacted customers. So, it has been easier to get the right assistance that you need. Examples include:
- Ford Credit
- Nissan USA
- Hyundai USA
- Chrysler Capital
- Kia Motors America
- Toyota Financial Services
- Lexus Financial Services
- General Motors Financial
- Honda Financial Services
- Mercedes-Benz Financial Services
It’s worth noting that in March 2020, our then-president, Donald Trump, signed a $2 trillion stimulus bill to provide economic relief during the pandemic. The funds from this Coronavirus Aid, Relief, and Economic Security (shortened to CARES) act were distributed through various temporary relief programs.
Sadly, however, the CARES act didn’t include any programs for those individuals with auto loans. So, you would either use the $1200 check from your federal stimulus package for the loan payment or approach the lender accordingly.
Can My Car Be Repossessed Right Now During The Pandemic
As of August 2021, health departments are still recording thousands of new Covid-19 cases. In fact, we could say there has been a slight increase in patient numbers compared to that of June. So, the coronavirus situation is still a pandemic and thousands of Americans are yet to resume their normal lives.
Furthermore, the unemployment benefits that came under the CARES bill are mostly finished now. If you were using your stimulus funds to settle payments with your auto lender, it means you need to have an alternative solution. Otherwise, most auto lenders are also reverting to business as usual.
On their end, the local governments are also getting rid of the jurisdiction protections that they were offering to borrowers during the early emergency period. So, we’re likely to start seeing an uptick in car repossession.
Lucky, if we may say, the regulators are also on the watch. So, the lenders will take some time to update their policies and procedures relating to motor vehicle repossessions to make sure what they do is by the book.
A good example is a policy to “cure” and “redeem”, both of which involve the borrowers getting their car back before it’s sold.
“Right to Cure” or “Right to redeem”
The “right to cure” the default means you can reinstate the contract and get the car back if you pay the past dues fees. But then, the auto financing company probably used an external recovery firm (repo man) to reclaim your vehicle. So, you’ll also need to pay the past due fees, as well as the repossession expense.
As for the “right to redeem” policy, it means the lender wants you to pay the entire amount owed before you can get your car back. But then, this repossession law is a uniform commercial code across almost all US states. Thus, the auto lender has to send a notice (with the whole owed amount) to the seller before the disposition of the collateral.
As was mentioned earlier, various states have different periods of redemption. Some like California have the 10 days, while others will have 15, 20, or any time before the disposition. So, you have to be conversant with your state laws on the subject in case the creditor fails to mention it on the notice letter.
Note, few states might have the right to reinstate or cure the contract under the Universal Commercial Code. If a creditor fails to provide it as required, you as the borrower could use the law against them. The creditor will then have to either pay costly lawsuit penalties or waive their right to a deficiency balance.
Ps. Delinquency is a fancy word for late payments.
For more information about the right to reinstate or redeem and other repossession laws, consult your State Attorney General or Local consumer protection agency.
Ways To Avoid Your Car Getting Repossessed Right Now During The Pandemic
If you find yourself in a situation where you’re behind on payments of your auto loan, don’t panic. First, your auto lender approved you for a car loan because he trusted and believed you’ll afford to pay. Also, this pandemic has affected both personal and commercial sectors. So, the lending institution will mostly provide an alternative that will work both ways.
But, anyway, the two key ways you can avoid your car getting repossessed right now during the pandemic include:
1. Know Your Car Repossession Rights
When you’re late to fulfill your car loan obligations, the lender can’t come after you without following the book. That means they have to follow the laws subject to your jurisdiction on repossession, as well as that of the contract you signed.
As for the contract policy, your auto loan becomes default if you’re 30 days late. The lender cannot repossess your car with non-payment claims during this window. But then, you’ll need to make the payment due and any applicable late fee.
As for the jurisdiction laws, you’ll need to check with your local consumer protection agency or State Attorney General. As we mentioned earlier, each state and local government have their own rules on what auto lenders should do during and after repossessing your car. If the lender (or their recovery company) breaks either of these rules, they not only lose other rights against you. But also they might need to pay you damages, which, sometimes, are more than what you owe them.
2. Early Communication With Your Auto Lender
If you feel that you might be unable to pay your auto loan payment, the first thing should be to inform your lender. The good thing is that many lenders are more likely to understand your situation now than before the pandemic.
Even better, the lender will have more choices to offer regarding your situation when you contact them sooner. The four common options are:
3. Reschedule your payment date
This one should be self-explanatory as it just means adjusting the date your payment is due. It’s mostly applicable where you want your loan payment due date to coincide with the time you receive your monthly income.
4. Give a new payment plan
In this option, the auto lender will describe a payment plan that can help you catch up and repay the payments you’ll or have missed.
5. Auto loan payment extension/ deferral
The lender is likely to offer the payment extension solution if they feel that your economic hardship is beyond rescheduling the payment date or giving another payment plan. Of course, your account will first need to pass the eligibility criteria, but it will give you a short break on the payments.
6. Refinance your auto loan
Just as the name, this option allows you to refinance the amount remaining on your current auto loan. Of course, it’s not always effective, but it could give you a lower interest rate or monthly payments.
Alternatively, you can refinance your car loan with a longer repayment period to reduce the monthly payments even further.
Technically, locking your car in the garage is not the right approach on your default auto loan. It’s no secret the lender may have the right to repossess it now that many industries are starting to return to normal. But then, there are still some laws that the creditor (or the hired property recovery company) cannot break.
For instance, one of the state laws requires the lending institutions to reclaim their property without a breach of the peace. As such, they can take the car if you left it on the parking lot or driveway, but not when it’s locked inside the garage.
Nonetheless, locking up your vehicle at home does defeat the purpose you decided to have one in the first place. And also it’s a bad impression that could hurt the relationship with your lender.
Therefore, the best tool to save your car from repossession during this period of the covid-19 pandemic is by communicating with your lender. Even if you have already missed a payment, don’t be afraid to reach out.