Repossession Border Jumpers – A Slap in the Face Loaded with Liabilities

Compliant Agencies Are Watching You!

It never ceases to amaze me. Year after year, so many lenders, forwarders and too many repossession agencies try to skirt the law to save or make a few bucks more. Aside from being an afront to legal compliant agencies, this penny-pinching mentality is not only the peak of unprofessional behavior but comes with the risks of six-figured liabilities.

It’s a sad fact that many lenders assume they can simply dispatch the cheapest repossession company available, often a lower-cost out of state firm, to pick up collateral anywhere in the United States. That assumption is dangerously wrong in at least 18 states (and counting) that require specific repossession agent or agency licensing.

When a lender hires an out-of-state, unlicensed agent to seize a vehicle in one of these regulated states, the lender is not just risking a slap on the wrist, they are opening themselves to six- and seven-figure liability, regulatory enforcement, and class-action exposure.

In addition to the financial liabilities, which are many, it is a slap in the face to those in state licensed agencies that are following the law.

Injustice to Licensed In-State Agencies

Compliant repossession companies in Illinois, Louisiana and other licensing states pay thousands of dollars per year in licensing fees, background checks, continuing education, insurance riders, and surety bonds. They are routinely underbid by 30–50 % by out of state unlicensed firms that have zero overhead in the licensing state.

Licensed Louisiana agency owner quote (2024 industry conference): “We’re forced to compete against companies that don’t pay a dime to the state, don’t carry the required insurance, and don’t even know Louisiana law. When something goes wrong, the lender blames us for being ‘too expensive,’ but they’re the ones who will pay six figures in a wrongful repo suit.”

This issue is not only a huge problem in Louisiana, but in multiple states including Illinois, where in April of 2025, the Illinois state association, The Alliance of Illinois Repossessors addressed the same.

“AIR will not sit idly by while forwarding companies attempt to shift legal liability to licensed Illinois agencies or place our members at risk of losing their operating authority,” said Santino “Sonny” Datoli, President of the Alliance of Illinois Repossessors. “We are committed to ensuring our members operate in full compliance with Illinois law, and if necessary, we will pursue legal or legislative action to protect them from coercive or extortionary practices.”

AIR reminds all forwarding companies that if their directives cause a licensed Illinois repossession company to lose its license, they will be held accountable, and the financial and operational damages to the agency will be aggressively pursued through legal channels.

Repossession companies in Illinois are encouraged to document any such directives from forwarding companies and report them to AIR for further action.

Louisiana does not at this time have a state association and agencies in this state should all put aside their differences to create one. The result of these skirting of licensing requirements is a race to the bottom that drives legitimate, heavily regulated companies out of business while rewarding the very actors the licensing laws were designed to control.

States That Currently Require Some Level of Repossession Agent/Agency Licensing (As of November 2025 – always verify current law)

Louisiana (most aggressive enforcement)
Georgia
Florida
Nevada
Utah
Connecticut
Hawaii
California (Recovery Agent license required)
Washington
Kentucky
West Virginia
New Hampshire
Michigan
Pennsylvania
Rhode Island
Arizona (in-state agency license + individual qualifier)
Idaho
Illinois (Recovery License for the company)
District of Columbia

While many states do not require a specific repossession license, other collection licensing, tow licensing and insurance requirements may be required. It is the responsibility of both lenders and forwarders to vet and verify these requirements before assignment.

Saving a few bucks by cutting corners in compliance is not only risky, it creates a gateway for consumer litigation.

The Lender’s Direct Risks

When an unlicensed agent performs the physical repossession in a licensing state, the lender can be held jointly and severally liable. Documented consequences include:

Wrongful Repossession Liability
Courts in Louisiana and Georgia have repeatedly ruled that using an unlicensed agent makes the entire repossession unlawful, even if the borrower was 180 days delinquent and a breach of peace never occurred. Borrowers can sue for conversion, trespass to chattels, and violations of state consumer protection statutes. Actual damage awards plus statutory and punitive damages routinely exceed $50,000–$150,000 per case.
Loss of Deficiency Judgment
Louisiana Revised Statutes § 6:966 and similar statutes in Georgia and Florida explicitly state that failure to comply with licensing requirements may bar the creditor from obtaining a deficiency judgment after sale of the collateral.
Class-Action Exposure
Law firms are now filing statewide class actions against lenders who systematically use unlicensed out of state agents. One pending case in the Middle District of Louisiana (2025) seeks certification for every repossession performed by unlicensed agents over a four-year period.
Regulatory Enforcement and Civil Money Penalties
Louisiana Office of Financial Institutions has fined lenders up to $25,000 per violation and has begun requiring repurchase of the loan or restitution to the borrower.
FDCPA and UCC § 9-609 Claims
Federal Fair Debt Collection Practices Act claims and state UCC violations are routinely added when an unlicensed third party is used.

Louisiana – Penalties for Unlicensed Repossession Activity

Penalties for operating without a license or violating related provisions are primarily civil and administrative, enforced by the OFI commissioner. There are no explicit criminal penalties outlined in the statutes or rules specifically for unlicensed repossession; instead, violations may lead to referral for further legal action, such as injunctions. The relevant provisions are:

Statute/Rule	Description	Specific Penalties
La. R.S. 6:966(D)	Requires licensing for repossession agents; violations tie into broader enforcement under Chapter 10-A.	– Serves as the statutory basis for administrative enforcement, including license denial or revocation.
LAC 10:XV.1303.A	Prohibits engaging in repossession business without a license.	– Basis for all enforcement actions; operating without authority may result in immediate cease-and-desist orders.
LAC 10:XV.1315.A(3)-(4)	Prohibits agencies from allowing unlicensed persons or unsupervised apprentices to perform repossessions.	– Subject to the same civil penalties as unlicensed operation.
LAC 10:XV.1317.C	Authorizes the commissioner to suspend, revoke, or deny licenses for violations, including unlicensed activity, false information, or failure to comply.	– License suspension or revocation. – Public notice of administrative actions.
LAC 10:XV.1317.I	Allows imposition of civil money penalties for any violation of the chapter or related self-help repossession laws.	– Up to $1,000 per violation, per day until corrected.
LAC 10:XV.1317.D	Permits referral of egregious violations to the attorney general or district attorney.	– Injunctions to stop unlicensed activity. – Potential court-ordered compliance and additional costs.
LAC 10:XV.1317.E	Requires public disclosure of certain enforcement actions.	– Administrative orders (e.g., cease-and-desist) may be published, affecting business reputation.

Additional Notes

Enforcement Process: The OFI may issue a notice of violation, followed by a hearing. Failure to pay penalties or comply can lead to license lapse or denial of future applications (LAC 10:XV.1317.C(8)-(9)).
Related Contexts: If the unlicensed activity involves broader consumer credit violations (e.g., under the Louisiana Consumer Credit Law, La. R.S. 9:3510 et seq.), additional penalties could apply, such as fines up to $5,000 or imprisonment for up to 1 year under La. R.S. 9:3553 (misdemeanor for knowing violations). However, this is not specific to repossession licensing.
Recommendations: For the most current details, consult the OFI directly or a licensed attorney, as rules may be updated (last major revision in 2017).

Sources: Louisiana Office of Financial Institutions (OFI) Repossession Statutes and Rules (2017).

Illinois – Penalties for Unlicensed Repossession Activity

Penalties are primarily civil and administrative, enforced by the ICC, with potential criminal escalation for willful violations. Operating without a license constitutes a business offense, and the ICC may impose fines, injunctions, or referrals for prosecution. Local ordinances (e.g., in Chicago) add municipal fines. Key provisions include:

Statute/Rule	Description	Specific Penalties
225 ILCS 422/110	Prohibits unlicensed individuals or entities from engaging in collateral recovery; authorizes ICC enforcement for violations of the Act.	– Civil penalties up to $1,000 per violation. – Injunctions to cease operations. – License denial, suspension, or revocation for related applicants.
225 ILCS 422/50	Requires licensing for agencies and agents; unlicensed activity is a business offense.	– Class A misdemeanor for individuals (up to 1 year imprisonment and/or $2,500 fine). – For entities, fines up to $25,000 per violation (as seen in ICC enforcement examples).
92 Ill. Adm. Code §1480.10 et seq.	Implements licensing prohibitions; violations include employing unlicensed agents or operating without permits.	– Administrative fines up to $1,000 per day until compliance. – Cease-and-desist orders. – Mandatory restitution for affected parties.
225 ILCS 422/65	Allows ICC to investigate complaints and impose sanctions for unlicensed or improper repossessions.	– Referral to Attorney General for civil suits, including recovery of damages. – Public disclosure of violations, impacting business operations.
Chicago Municipal Code §4-4-010 (local example)	Requires city licensing for towing/repossession businesses; statewide unlicensed activity may trigger similar local enforcement.	– Fines of $250–$500 per day for unlicensed operations in Chicago; varies by municipality.

Additional Notes

Enforcement Process: The ICC handles complaints and investigations, potentially leading to hearings. Egregious cases may involve the Illinois Attorney General under consumer protection laws (815 ILCS 505/1 et seq.), adding damages up to $25,000 for deceptive practices.
Related Contexts: Breaching the peace during repossession (810 ILCS 5/9-609) can lead to separate civil liability or criminal charges (e.g., trespass under 720 ILCS 5/21-3). If unlicensed activity involves debt collection, the Fair Debt Collection Practices Act (FDCPA, 15 U.S.C. §1692) may apply federally, allowing up to $1,000 in statutory damages.
Recommendations: Verify current rules with the ICC or a licensed attorney, as amendments occur (e.g., SB1500 in 2023 addressed hazardous materials handling). No pre-repossession notice is required statewide, but post-repossession notices are mandatory (92 Ill. Adm. Code §1010.160).

Sources: Illinois Compiled Statutes (ILCS); Illinois Administrative Code; Illinois Commerce Commission guidelines (as of 2025).

While these state specific statutes do not specifically target the lenders or assigning parties, these are the gateway for the consumer protection attorneys. These vultures will exploit your every misstep with civil claims far more damaging. With allegations such as breach of peace and FDCPA violations, they will attempt to extinguish the contract outright and pile on additional claims that will make your head spin.

Wake Up!

Smell the cat food. Not only can one single unlicensed repossession get you in hot water with the state, but it can also invite in the class-action vultures who are just chomping on the bit to flush away your deficiency rights and pound you with damages in court. And for anyone who thinks they can get away with it, fair warning; you are being watched.

Compliant agencies in these states are willing to dance with the devil to stop you. This problem has reached the point where these agencies are willing and encouraged to go straight to the class action vulture attorneys and tip them off.

The money you save is chump change next to the fallout that is coming your way “WHEN” you do get caught. I say “WHEN” not if. It’s just a matter of time until you do.

Geo-fence those out of state bids, or watch your career, your profits and thoughts of saving a few bucks evaporate into a hell of civil penalties and a gauntlet of depositions, discovery and lengthy expensive engagements with some lawyers looking to eat you for lunch.

What Prudent Lenders Should Be Doing

Requiring proof of licensing in every state where the agent operates.
Assure that your forwarding companies vet and guarantee compliance to all state licensing laws.
Geo-fencing portfolios and refusing to assign accounts in high-risk licensing states to unlicensed agents.

Disclaimer:

This article is for informational purposes only and does not constitute legal advice. Laws change frequently and the application of licensing statutes depends on specific facts. Lenders and repossession agencies should consult qualified counsel admitted in each relevant state before conducting or assigning repossession activity.

Kevin Armstrong

Publisher