California law permits cars to be repossessed after one late or missed loan payment. Cars may be repossessed after missed insurance payments as well. There is no legally required grace period, and the repossession company doesn’t have to give you notice that they are repossessing your car.
A car repossession can make it impossible to get to work, school, grocery shopping, pharmacies, and doctor appointments. The car repossession process in California can happen fast and catch you off guard. There isn’t a mandatory grace period for late car loan payments in California. In this article, we’ll help you understand the repo process under California law and introduce you to some solutions, if you’re already facing vehicle repossession. Being proactive may help you keep your car on the road and successfully manage your auto loan debt.
When Can My Car Be Repossessed In California?
California law permits cars to be repossessed after one late or missed loan payment. Cars may be repossessed after missed insurance payments as well. There is no legally required grace period, and the repossession company doesn’t have to give you notice that they are repossessing your car. A lender could provide you with a grace period in a contract - and they could send you a letter telling you they are going to repossess your car—but these actions are not legally required.
You can check the website for your local consumer protection agency, such as the Los Angeles County Consumer and Business Affairs website, to keep up with the latest news on California car repossession laws. You can also check the California Attorney General website for news on car repossessions.
Laws Covering Car Repossession In California
Repossession laws are covered in California’s Civil Code and Commercial Code. These laws cover contracts, sales, borrower rights, and lender rights. The Automobile Sales Finance Act in California’s Civil Code covers lender obligations concerning motor vehicle repossession. When lenders don’t follow the laws, they can be sued.
In 2020, a lawsuit against auto lender Santander Consumer USA Inc. was settled for $550 million. The lenders involved loaned money to people that were likely to default on their car loans and the company violated consumer protection laws. In the settlement, people who had their cars repossessed were able to have their deficiency balances waived. Some people who did not have their cars repossessed were able to keep their vehicles, despite being behind on their loan payments.
Secured Debt Can Make You Insecure
Your car loan agreement is a type of secured debt. That means the car loan contract you signed contained a promise that if you missed the agreed-upon payments, the lender could repossess your car. It’s important to make your car payments and your car insurance payments on time so your car doesn’t get repossessed. The Federal Trade Commission recommends you contact your lender if you can’t make your required car payments, as sometimes lenders will work with borrowers who are struggling. Some lenders allow for flexible repayment arrangements due to the coronavirus pandemic.
Your contract also likely contained a clause that you would maintain car insurance on the vehicle. This means that even if you make your car loan payment on time, your car can be repossessed if you have a lapse in your insurance payments. Car & Driver magazine has reported the publication expects that car repossessions will increase in 2021 due to the pandemic.
Can Repo Agents Take Cars From Anywhere?
If you miss a payment and the repossession agent comes for your car, the repo man (or woman) must follow certain California laws governing repossession. These laws fall under business codes, vehicle codes, and government codes. For instance, the repossession agent can’t enter a locked property or gated community to take your car unless they have permission to enter. Your car is temporarily safe from repo man (or woman) if it’s in a gated area, private building, or locked garage.
Repo agents are also not allowed to breach the peace. But agents can take your car if it’s parked on the street or in a public parking lot, and they can tow your vehicle at night. That means you could live in Los Angeles and drive to San Francisco, then have your car repossessed in San Francisco if you park in a public lot.
Repo agents can take your car without notice and without your presence, but they must be licensed with California’s Bureau of Security and Investigative Services (BSIS). You can verify a license for a repossession agent on the BSIS website. Go to the “verify license” option, then be sure to click in the “Boards and Bureau” box and scroll down to “Security and Investigative Services, Bureau of” to narrow down your search.
After your car is repossessed, you’ll be sent a written notice. One benefit of the notice is that you’ll know for certain that your car was repossessed and not stolen. The repo agent is required to notify law enforcement that the vehicle has been towed within an hour of a repossession.
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What Notices Are Required After My Car Is Repossessed?
The agency that repossessed your car must give you a Notice of Seizure within 48 hours of repossession. Contact information for the agency that repossessed your car and for your car loan lender (the legal owner) must be included on the notice.
The repossession agency must also give you a list (inventory) of the personal property that was in your car. Personal property will include items such as car seats, cell phones, and school books, but it won’t include car upgrades, such as new rims or an upgraded stereo. Upgrades that you made to the car that are affixed to the car won’t be returned separately from the car.
You will have 60 days to collect your personal effects. After 60 days, the personal property you left in the car can be sold. If you’re present when the car is being repossessed, you can ask to collect your personal items from the car before it’s towed.
You’ll also get a notice telling you what you can do to have the car returned to you. This usually means making a payment in full and paying extra fees and costs for the repossession.
When the Repo Agent Sells Your Car
If you don’t pay what you owe, the lender has the right to sell your car at a public auction. They must give you a notice of intent that they are selling the car at least 15 days before the date of the sale. This notice must also be served within 60 days of repossession. You do have the legal right to ask the repo company for a 10-day extension of the sale date, but you can’t postpone it forever.
Your car loan debt will likely increase after the repossessed vehicle is sold. The car will probably be sold for less than what you owe, and you’ll be left with what’s called a “deficiency balance.” This balance includes penalties, fees, interest, and any costs that were incurred from the repossession and sale, as well as any remainder of the loan balance not covered by the sale. Lenders have the right to sue you for this money.
Chances are that you’ll receive a summons for the deficiency balance after the car is sold. You don’t want to ignore this summons. If you do, a default judgment can be entered and your wages could be garnished or a lien could be placed on your home. If you answer the summons, you’ll have the opportunity to reduce your claim or negotiate the amount due.
What Are My Options Before the Car Is Sold?
You can pay back your loan, make repayment arrangements, bid on your car, or file for bankruptcy.
If your car is repossessed, all hope is not lost. Under California law, you have options available that could help you get your vehicle back and manage your debt. A car repossession can feel devastating at first and it can cause an avalanche of problems. But, if you take advantage of certain opportunities, this challenge can be managed successfully. You can seek legal advice by hiring a local California attorney to help you plan the best way to deal with a repossession and car loan debt so you can stay focused on the road ahead.