Stay Compliant with Vehicle Recovery Laws

How to Stay Compliant with Vehicle Recovery Laws and Regulations

As an auto finance professional, it is essential to stay compliant with vehicle recovery laws and regulations to avoid legal repercussions and maintain a solid reputation in the community.

According to a recent report by the Consumer Financial Protection Bureau (CFPB), there has been an increase in both auto loan delinquencies and repossessions post-Pandemic. The CFPB has taken action against lenders and recovery companies for engaging in illegal practices such as repossessing vehicles without proper notice or court orders. In 2020 alone, the CFPB ordered over $21 million in consumer relief for these violations. Remember, having an attorney or legal advisor review repossession policies, procedures, and practices is crucial to ensure compliance.

Here are some essential suggestions to help avoid legal problems:

• • Fully understand and keep abreast of changes to all federal, state, and local laws and rules governing repossessions.

• • Join your state dealer association and be an active member. These associations serve as a trusted source when it comes to changes in law and play a role in lobbying for common sense legislation. Attend trade shows with training and educational seminars and workshops that assist you with avoiding compliance pitfalls. Look for and work with reputable, knowledgeable vendors. Organizations with solid partnerships, like Advantage and the American Recovery Association (ARA), work diligently to help inform and educate dealers.

• • Rely on certified recovery agents bonded by reputable organizations such as the ARA. These organizations set standards for ethical and professional conduct and require ongoing training for their members.

• • Ensure that your contracts with your clients include clear and transparent language about the terms and conditions of the finance agreement. Contracts must include the right to recover the collateral in default. It is also essential to provide borrowers with clear and concise notice before initiating the repossession process. Disclosing the use of GPS technology on your vehicle collateral in all contracts will help lower delinquent payments and minimize financial losses.

• • Laws governing repossessions will vary by state, so it’s essential to understand how this affects a repossession should a vehicle cross state lines. For example, providing notice to the borrower before repossessing the vehicle is necessary in some cases, and in other instances, a court order is necessary. Therefore, ensuring that the recovery agent follows the proper procedures is vital. Again, using ARA’s recovery professionals helps to ensure you are protected.

• • Keep detailed records of all communication and actions related to the repossession. Records should include written and verbal communication with the borrower, recovery agents, and other parties involved. Having detailed documentation will protect lenders in case of legal disputes.

• • Staff members should be well-trained in vehicle recovery laws and regulations and keep current. Providing ongoing training will help ensure your policies are followed.