ARA – Wrongful Repossession & Owning Liability

ARA - Wrongful Repossession & Owning Liability

IRVING (July 14, 2022) – American Recovery Association (ARA) is displeased to share the following updates to The Consumer Financial Protection Bureau (CFPB) and its application of the Unfair and Deceptive Acts and Practices (UDAAP) as recently released in its most recently bulletin, 2022-04: Mitigating Harm from Repossession of Automobiles. ARA is strongly opposed to the recommendations outlined in the bulletin.

The bulletin outlines the Bureau’s application of the UDAAP to the repossession process. In it, the Bureau lays out a variety of categories of concern, and references prior enforcement cases brought by the Bureau.

In Section III of the bulletin, titled “The Bureau’s Expectations”, they lay out 20 unique examples of instances where the bureau intends to hold “auto lenders, loan holders, and servicers accountable if they or their agents commit UDAAPs when repossessing automobiles”.

A recent letter from a lender client that was distributed to their network of agents and forwarders indicates that repossession agents will be held liable in situations where the wrongful repossession was determined to be a result of a failure on the part of the repossession agent. This initiative went into effect on July 1, 2022, for this lender and their agents. Two examples were provided:

1) the repossession order was not validated prior to the repossession, and;

2) if the repossession agent caused a delay in returning collateral that was deemed “wrongfully repossessed” by the lender.

The letter also outlines monetary penalties that are to be borne by the repossession agent under these circumstances.

Standard indemnification clauses already exist in contracts between lenders, servicers and the agents. Issuing a letter indicating a shift in liability and monetary penalties to your network of agents comes across more like an edict, and does not necessarily constitute a legally binding, and agreed to contract change.

Ultimately, the bulletin puts an additional burden on the agents that is redundant with the liability already contractually owned by agents within the contracts that are already in place. The ARA welcomes all opportunities to work with lender and servicer partners to build standards and procedures that are acceptable to all involved.

About American Recovery Association, Inc.

American Recovery Association (ARA) is the world’s largest association of recovery and remarketing professionals. ARA members specialize in locating and repossessing collateral on behalf of lending institutions, including banks, savings institutions, finance companies, credit unions, rental/leasing companies, and auto, truck and equipment dealers. ARA is a nonprofit association whose members serve 27,000 national and international cities. All members are certified independent business operators. For more information, call 972.755.4755 or visit the website at www.repo.org.