Lenders: A Repossession is a Repossession – Ignore This at Your Own Peril

Lenders who delegate these recoveries to unlicensed, untrained, or non-specialized providers are playing Russian roulette with compliance risk.

Lenders: A Repossession is a Repossession – Ignore This at Your Own Peril

EDITORIAL

In the lending world, the pressure to reduce expenses is constant. And with repossession volume at a fever pitch, some lenders are taking risky moves to save a few bucks, a savings that can and probably will come back to bite them tenfold.

It’s no secret that some national transport and auction companies are moving into the repo space. While they aren’t willing to do the dirty work and take the risk of involuntary repossessions, they are offering to recover voluntary and impound repossessions at a lower price point than actual professional repossession companies.

While the pressure to keep expenses down may be attractive, it might be advisable for you to take a second to wonder just why they are doing it so much cheaper. That’s pretty simple really.

Cost Cutting = Compliance Cutting

I am sure that the transport and auction companies who’ve recently entered the repo space are telling you, the lenders, that they are fully licensed, trained, and insured. If that is so, what do they provide for evidence? A company policy stating that they do? A listing of all personnel, their background screening, and training?

I doubt it, seriously. And to be frank, I doubt many of you really want to know. Let’s face it: a lot of these decisions are made above many people’s pay grades. And those whose pay grade it is, well, little things like compliance just don’t seem to be that big of an issue when a repossession is a voluntary or an impound.

But here’s a messy detail no one wants to hear: a repossession is a repossession.

A Repossession is a Repossession

Whether in state or federal law (primarily the Uniform Commercial Code Article 9), there is no meaningful differentiation between an involuntary, a voluntary, or an impound repossession when it comes to post-recovery obligations. They are all covered under the same laws. And there are a number of very state-specific laws that they ALL MUST FOLLOW.

Personal property must be removed, inventoried, and stored according to statutory specifications, with a notice of these items mailed to the borrower. This applies to involuntary, voluntary, and impound repossessions alike.
Clearing borrower personal information stored in the vehicle’s onboard data systems is required in certain states.
State licensing and repossession credentials are required in numerous states. None of these states carve out exceptions based on whether the recovery was involuntary, voluntary, or an impound.
For each of these requirements, there is no differentiation in the law between an involuntary, voluntary, or an impound repossession.

State Laws

Compliance requirements vary by state, but here are four prominent examples that illustrate the risk:

Illinois Specific
Illinois strictly regulates collateral recovery. Repossession agencies and their employees must be licensed by the Illinois Commerce Commission. In addition, repossessors MUST obtain a repossession ticket issued by the state in order to conduct a repossession, regardless of involuntary, voluntary, or an impound status.

A 2024 law specifically requires licensed agencies to clear, erase, delete, or otherwise eliminate personal information from the vehicle’s systems before the vehicle leaves the lot. Personal property must also be properly inventoried and made available for retrieval. Using an unlicensed transporter sidesteps these mandates at the lender’s peril.

Florida Specific
Florida requires recovery agents to hold a Class “E” license or equivalent, with strict rules governing repossession activities. Agents must prepare a detailed inventory of all personal effects found in the vehicle and maintain those records for at least two years. Unlicensed entities performing what amounts to a repossession—even if labeled a “transport” or “voluntary pickup”—risk violating Chapter 493 and exposing the assigning lender to liability.

Texas Specific
Texas does not require a specific state-level license exclusively for repossession agents (though operators using tow trucks must hold appropriate Tow Truck Operator credentials from the Texas Department of Licensing and Regulation). However, under the Texas Business & Commerce Code and related provisions like the Finance Code, personal property in the vehicle remains the borrower’s and must be made available for retrieval upon request—regardless of whether the recovery was involuntary, voluntary surrender, or impound.

Creditors typically must provide notice allowing a reasonable period (often 30-31 days) for pickup, after which unclaimed items may be disposed of under certain conditions. Mishandling personal belongings exposes lenders to claims of conversion or negligence, and non-specialized transporters may fail to follow these protocols properly.

California Specific
California strictly regulates repossession under the Collateral Recovery Act, administered by the Bureau of Security and Investigative Services (BSIS). Repossession agencies must be licensed, and the licensing requirements apply to all collateral recoveries—with no exceptions carved out for voluntary surrenders or impounds. After taking possession, licensed agencies must promptly inventory all personal effects found in the vehicle, provide the debtor with a detailed inventory (typically within 48 hours), store the items securely, and allow retrieval. The creditor must also issue a Notice of Intent to Dispose, which addresses personal property rights. Assigning recovery to an unlicensed transporter—even for a “voluntary” pickup—risks violating state licensing laws and exposing the lender to liability.

The Risks: Untrained, Unlicensed, Underinsured

By choosing cheaper transport services over licensed professional repossession agencies, lenders expose themselves to significant liability. Transport companies may lack:

Training in the nuanced compliance obligations unique to repossessions
Licensing required in regulated states for anyone taking possession of collateral on behalf of a creditor
Adequate insurance tailored to the specific risks of repossession, including property handling, data privacy, and borrower claims

Personal Property: Are You 100% Sure They Are Following the Law?

Proper handling of personal belongings left in a repossessed vehicle is not optional, it is mandatory under specific state laws. Professional agencies remove items, create a detailed inventory (often with photographs), store them securely, and send the borrower a notice explaining how to retrieve them.

Failure to do so opens the door to claims of conversion, theft, or negligence. Even in a “voluntary” surrender, borrowers frequently dispute missing items, and the lender, not the transporter, bears ultimate responsibility.

An Insider’s View

According to one former employee of one such transport and auction company now operating in the repossession space, personal property complaints from borrowers are their number one issue. Complaints ranging from no response from the auction to missing property and claims of no property are most common.

The same source also claims that the majority of these auctions and transporters have no dedicated personal property storage facilities.

The same allegedly holds true for their lack of proper state licenses. It is said that there is a complete lack of adherence to state licensing requirements as well as laws. It is accordingly stated that when these deficiencies and violations were brought to the attention of executive staff, they were dismissed and allegedly carry on to this day.

The why is obvious; if these transport and auction companies had to comply with the same laws and regulations as professional repossessors, they would be unable to maintain their lower price point. A price point which is the sole reason some foolhardy lenders have chosen to work with them.

A Class Action Gold Mine

Violations of repossession compliance laws have fueled numerous high-dollar class action lawsuits against lenders in recent years. Improper personal property handling, failure to provide required notices, unlicensed recovery activity, and data privacy breaches have all triggered multimillion-dollar settlements and judgments.

Borrowers’ attorneys are increasingly sophisticated and aggressive in this space. A pattern of using cut-rate transporters that skirt licensing, training, and procedural requirements creates exactly the kind of systemic violation that class counsel dreams about. One overlooked inventory, one missing notice, one unlicensed pickup multiplied across thousands of accounts can turn a few dollars saved per unit into tens of millions in liability.

Conclusion

The short-term savings offered by transport companies are an illusion. A repossession is a repossession—full stop. The legal obligations do not disappear because the borrower called it “voluntary” or because the vehicle was impounded. Lenders who delegate these recoveries to unlicensed, untrained, or non-specialized providers are playing Russian roulette with compliance risk.

Protect your institution. Partner exclusively with professional, licensed repossession agencies that prioritize compliance as rigorously as recovery. The real cost of cutting corners isn’t measured in dollars saved today, it’s measured in the lawsuits you’ll pay for tomorrow. Ignore this at your own peril.

Kevin Armstrong

Publisher