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Repo Madness

posted by Katie Porter

A few months ago on Credit Slips Bob Lawless described a situation in which a car repo agent in California took a car with a toddler inside. Bob thought it wasn't breach of the peace, but I think Bob was wrong and he should stick to prognosticating about the bankruptcy filing rate, where he's been dead on. The National Consumer Law Center has issued a new report, Repo Madness, that describes many more harrowing incidents in repossession. The report describes how two repo agents and four auto owners have been killed in the past three years during repossessions, and includes a map showing geographically how many and where particularly troubling incidents have occurred. The report makes an interesting analogy to laws that limited landlords' rights to evict tenants, suggesting that mandating a summary process for repossession (such as replevin) may be a social and economic good. The report is a reminder of the dark side of self-help repossession, which students (and maybe their teachers) tend to find the most fun and entertaining day of Article 9 Secured Transactions classes.  


In my defense, it was a court holding that had found no breach of the peace where a repo agent had driven off in a repossessed automobile with children in the back seat. (See Chapa v. Traciers & Associates, 267 S.W.3d 386 (Tex. App. 2008) (http://www.14thcoa.courts.state.tx.us/opinions/HTMLopinion.asp?OpinionID=84777).

If I got to write the rules from scratch, I would have a cause of action for these sorts of facts. The problem is the statute and its accompanying case law, which seems to require some sort of resistance by a debtor to prevent a self-help repossession. In fact, given the statute and existing case law, it's not obvious to me the Chapa court reached the wrong result -- see interminable debate about the difference between "interpreting the law" and "rewriting the law."

And all of that, after all, is the lesson here. The law on self-help repossession isn't working and needs to be reconceptualized and rewritten, which I think is Katie's point and the point of the NCLC report (which has very specific recommendations at pp. 16-17).

The report estimates that there are 2 million repos per year, so, over the three years in which the 6 fatalities occurred, there were approximately 6 million repos, meaning that the risk of a repo related fatality is one in a million. Probably there are greater risks to turn one's attention to first.

I read the report and the overwhelming majority of the incidents listed involved borrowers who threatened or assaulted the repo agents. I'm having difficulty feeling sympathetic for people who are willing to shoot someone over a 12 year old Chevy that they haven't been paying for and they know it. The repo man's life would be a lot safer if there weren't so many guns out there, but it's politically easier to make auto lending economically riskier than to take on the NRA, I suppose.

In response to FJP912, a 12-year old Chevy or any car is not worth anyone's life. The only thing up for discussion is whether an auto lender should be able to engage in a stealthy self-help repossession or instead should have to initiate some type of process to take back the automobile. It's the repo agent that is in the line of fire, sometimes literally, while the auto lender reaps the benefits of the existing rule.

As it stands right now, the law allows self-help repossession only if there is no "breach of the peace," a term that does not admit of ready definition. Because resistance by the debtor usually leads to a breach of the peace, the law actually encourages resistance. I'm not condoning waving a gun or threatening violence, but recognizing the reality of the situation.

Bob, I understand your concern, but the other side of the story is that the rules are different for cars (as opposed to real estate) because cars can and do "disappear." The costs of any kind of legal process -- either in attorney's fees or in the lost time of the creditor acting pro se -- are significant in comparison to a $5000-ish loan balance on a "buy here pay here" car. And borrowers have a funny way of knowing the repo laws and seeking to exploit every angle, even if no guns are involved. Ask any mom-and-pop residential landlord how much they love "summary" eviction process and how long it really takes to get rid of a nonpaying tenant.

It's another case of the dilemmas involved in regulating subprime credit markets. Either the costs of compliance get passed on to the (already poor) consumer, or the availability of credit is reduced, or both. Calibrating regulation to balance the benefits of regulation against those side effects is tricky. People go to buy here-pay here dealers because they have few if any alternatives. I like messing with beater cars and I can actually tell people how to buy a good $2000 car. But many working people don't even have that much cash at once. So they need someone who will take $500 down and give them weekly payments on a $5000 car.

I don't know where borrowers get their legal training from. What I do know is that most every story I read on repo men's techniques says that just asking for the keys works remarkably often.

An action for replevin on a low-value car would likely produce a similar result than a self-help repossession. Unless the borrower really wanted to or had some reason to contest, it would be likely that the lender would get a default judgment, direct the sheriff to execute on the writ, and recover the car. If the car "disappeared," the borrower could be found in contempt (at least in Iowa). The quick-and-dirty self-help recovery may still be cheaper, but in cases where it's likely to cause a substantial breach of the peace or death, the lender should be responsible for making the wrong choice.

I believe it would be a good idea if Buy Here Pay Here Dealerships would offer a fair grace period, as like banks or other lenders do. The element of surprise would be less, and I would hope it would eliminate some of the Repo drama. Most of these Buy HERE Pay HERE places want you to be 1 day late, just to recover the automobile, and keep your down payment as well as other funds collected. Then do the process all over again. If Credit Card Companies, Banks, retailers, etc have laws to abide, so should Buy Here Pay Here. I am actually stunned no laws areenforced as it is, this is why so many Americans are getting ripped on these types of loans. The loan is based on the hope of ruining someone, and making a huge profit off such small tardiness. Traditional loans offer 14 days grace, I think 7 days at least would be a start. All people have a rough week from time to time. Just my 2 cents worth.

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