Repossession is generally used to refer to a financial institution taking back an object that was either used as collateral or rented or leased in a transaction. Repossession is a "self-help" type of action in which the party having right of ownership of the property in question takes the property back from the party having right of possession without invoking court proceedings. The property is then sold on by either the financial institution or 3rd party sellers. The extent to which repossession is authorized, and how it may be executed, greatly varies in different jurisdictions (see below).
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Repossession is usually carried out in accordance with a purchase contract or credit contract, in which the consumer agrees that the seller (the "lienholder") may repossess the object if the signers are past the grace period (generally for prime lenders the critical number is 30 days late making an installment payment but can vary based on how many payments have already been made, the length of the business relationship, reason why past due, etc.). Contracts that authorize repossession also usually specify additional fines that the consumer must pay to the seller, ostensibly to cover the seller's costs of the repossession and of depreciated value of the object, as the seller is now in possession of a "used" object. In some places self-help repossession is not permitted; the lien holder is required to go to court to obtain an order of replevin. However, in some states, repossession is mandatory and suits of replevin are not permitted. Unscrupulous creditors may try to lull a debtor into a false sense of security by the use of a tactic sometimes called the "gab and grab." The creditor will orally agree to give the debtor extra time to make a payment--this is the "gab." But the creditor is only doing this to facilitate the repossession--the "grab." The creditor ignores the oral agreement to extend the time of payment and arranges for an immediate repossession. This tactic has been deemed unlawful by numerous courts. See, e.g., Demitro v. GMAC Corp., 388 Ill. App. 3d 15 (Ill App. Ct. 2009).
If a lender finds itself in the situation of needing to repossess property while the borrower attempts to avoid this, the dealer may contract the work of repossession out to a repossession agent. Many things can be repossessed, but most repossession agencies focus on auto repossession.
The repo agent normally uses a tow truck or pickup truck with a special towing attachment called a boom, but sometimes they pick the lock or obtain the key from the car owner.
Usually the vehicle owner must be notified of a repossession. The repossession agent will find the car and check the VIN to make sure they have the right car. They will then hook up the car to the tow truck and tow it away or pick the lock and drive it away.
Repossession does not necessarily satisfy the loan. If the repossessor sells the asset for an appropriate amount, and if that amount is less than the amount of the loan, and if the repossessor sues the debtor for the balance (plus reasonable fees if applicable) in a timely manner, the debtor may be liable to pay the balance (sometimes called the "deficiency").[1]
Whether a debtor is actually liable for a balance depends on jurisdiction and on the details of the loan contract. In the case of a nonrecourse debt for example, the debtor is not personally liable for a deficiency.
The existence and handling of repossessions varies greatly between jurisdictions. In some jurisdictions self-help is limited to special circumstances, so in general the right of possession can only be enforced by a court and/or other official agents.
When a provision of law requires when repossession takes place, the lien holder has a non-delegatable obligation not to cause a Breach of the Peace (which is synonymous with disturbing the peace) in performing the repossession or the repossession will be reversed, and the party ordering the repossession will be liable for damages (or the lienholder will be held responsible). This requirement not to breach the peace includes even if the breach is caused by the debtor objecting to the repossession or resists the repossession. In MBank El Paso v. Sanchez, 836 S.W.2d 151, where a repossession agent towed away a car even after the loanee locked herself in it, the court decided that this was an unlawful breach of the peace and declared the repossession invalid. The debtor was also awarded $1,200,000 in damages from the bank involved.
These numbers and text relate to home mortgage repossessions in England.
| Year | Claims Issued | Claims Leading To An Order | Properties Taken Into Possession |
|---|---|---|---|
| 1990 | 145,350 | 103,508 | 43,900 |
| 1991 | 186,649 | 142,905 | 75,500 |
| 1992 | 142,162 | 126,881 | 68,600 |
| 1993 | 116,181 | 105,283 | 58,600 |
| 1994 | 87,958 | 77,681 | 49,200 |
| 1995 | 84,170 | 75,258 | 49,400 |
| 1996 | 79,858 | 71,203 | 42,600 |
| 1997 | 67,073 | 57,156 | 32,800 |
| 1998 | 84,836 | 66,055 | 33,900 |
| 1999 | 77,818 | 53,448 | 29,200 |
| 2000 | 70,140 | 48,403 | 22,900 |
| 2001 | 65,555 | 45,812 | 18,200 |
| 2002 | 62,862 | 40,430 | 12,000 |
| 2003 | 65,373 | 39,784 | 8,500 |
| 2004 | 76,993 | 45,356 | 8,200 |
| 2005 | 114,733 | 68,922 | 14,500 |
| 2006 | 131,248 | 88,018 | 21,000 |
| 2007 | 137,725 | 90,654 | 25,900 |
| 2008 | 142,741 | 111,763 | 40,000 |
| 2009 | N/A | N/A | 48,000[2] |
Source: Council of Mortgage Lenders and The Ministry of Justice.[3]
In 2010, there looks to be a downtrend though, as lenders seized 9,400 properties in April, May and June, 400 fewer than in the first quarter of 2010, according to the Council of Mortgage Lenders (CML).[4]
However, repossession lawyer Moore Blatch[5] advises that whilst the number of repossessions is falling, the number of people in arrears by 3 months or more is actually significantly higher. At the end of June 2009 the number of people in arrears by 3 months or more was 270,400 compared with 264,700 in the first quarter, and 152,700 in the second quarter of 2008 - a 77% increase over 12 months. The alternative quoted measure of arrears, preferred for historical comparisons, is the number of loans in arrears by 2.5% or more of the outstanding mortgage balance. The number of loans in arrears by 2.5% or more totalled 205,600 (1.85% of all loans), which was only 1,700 higher than the previous quarter’s figure of 203,900, but a 46% increase from 139,700 at the end of the second quarter of 2008.[6]
| Region | HPI Regional Average* (£) | whitehotproperty.co.uk average** (£) | Percentage difference |
|---|---|---|---|
| South East England | 206,426 | 181,947 | -13.5% |
| East Anglia | 158,205 | 140,503 | -12.6% |
| North England | 134,311 | 123,368 | -8.9% |
| Greater London | 241,306 | 224,833 | -7.3% |
| South-West England | 179,428 | 167,846 | -6.9% |
| Yorkshire & Humberside | 120,988 | 114,725 | -5.5% |
| East Midlands | 135,873 | 131,988 | -2.9% |
| West Midlands | 152,598 | 150,329 | -1.5% |
| North West England | 123,795 | 129,757 | +4.6% |
| AVERAGE | 161,437 | 151,700 | -6.4% |
*Source: Halifax Price Index Regional Price Update - Q2 (April–June 9)
**Source: Properties sold by Whitehot Property[7] - Q2 (April–June 9).
Repossession in the form of self-help is generally illegal, and an act of self-help repossession constitutes theft. In almost all cases, if the debtor is unable or unwilling to pay an outstanding debt, the creditor must first obtain either a court order authorising the repossession (Vollstreckungsbescheid, only possible if the debtor does not contest the debt) or a regular court judgment. The debt must then be collected by an officer of the court (Gerichtsvollzieher); only this officer of the court may use force (such as forcing open a door, or enlisting help from police forces) to collect the debt. In particular, neither the creditor nor private debt collection agencies may use force or seize property against the will of the debtor.
Some very specific forms of self-help repossession are legal. For example, a landlord may seize the tenant's property in the rented object if there are outstanding payments.[8]