Delinquency Tolerance and the Risk of Wrongful Repossession

Every day, collectors draw lines in the sand with delinquency and how much will be tolerated. After all, repossessing collateral is not a lenders true objective, it is the final straw, a corrective action or an act of finalization depending on its outcome. Unfortunately, when we practice any level of tolerance, we are teaching borrowers that we will tolerate it again and there will be no repercussions as long as they don’t cross that same line. This tolerance can be a trap for wrongful repossession claims and lawsuits against both the lender as well as the repossession company if the lender is not sending a “Cobb Notice.”

What is a Cobb Notice?

Back in 1980 a lawsuit was filed known as; Cobb v. Midwest Recovery Bureau Co. In short, during the entire history of Mr. Cobb’s loan, he was delinquent in payments. Delinquency which the lender tolerated, again and again for years in varying numbers of missed payments. Eventually, the lender, Mack Financial Corp., had enough and assigned it for repossession.

The problem laid in the fact that Mr. Cobb’s loan had been further behind in payments in the past and no action had been taken. So, when Mack finally did repossess his truck, Mr. Cobb cried foul. Not only was Mack Financial dragged into court, but the repossession company, Midwest Recovery Bureau, was served as well.

After protracted litigation, the Supreme Court of Minnesota sided with Mr. Cobb. Without getting into great detail, this set the stage for “Cobb Notices.”

Most anyone collecting or repossessing outside of the state of Minnesota has probably never heard of these notices, but similar legal notice requirements exist across the nation.

How does this effect the repossessor? Are your lenders sending them? Have you ever asked? What is the worst that can happen if they don’t?

To learn more about these notices, please read;

“The Cobb Notice: Beware “Reasonable Reliance” Issues in Secured Financing Agreements”