New law good for the repo man
You may catch a TV or movie scene showing the "repo man" pulling up and towing away a car when the owner falls behind on payments. It makes for good drama, but historically, it has been extremely rare in real life in Wisconsin -- that is, until a few months ago when a change in Wisconsin's consumer law took effect.
Act 255 now makes it much easier for Wisconsin banks or lenders to repossess a vehicle when a person isn't making the payments. The law provides a simplified process to use repossession as a method of dealing with nonpayers, and that, in turn, helps lenders reduce associated costs.
The nonpayer benefits by not having to pay additional court costs and good customers potentially benefit in the form of reduced interest rates.
In the past, lenders' hands were tied when it came to taking action on unpaid consumer loans. Unless the consumer who was behind on payments voluntarily surrendered the vehicle, the lender had to go through several legal hoops, including filing a small-claims action to regain the collateral -- the car.
The consumer then had the ability to contest the action and have a trial. If the lender failed to follow these procedures and repossessed the car without going to court first, the consumer could recover the car, the payments made on the car and legal fees, easily costing lenders tens of thousands of dollars.
Additionally, before Act 255, even if the nonpaying consumer voluntarily surrendered the vehicle, without a proper form, there was no guarantee that the consumer would not change his mind later and claim he was forced into giving up the car. Again, that could result in a lengthy court battle and a big potential hit to the lender's bottom line.
These were huge risks that many banks and lenders did not want to take and that left them scratching their heads about how to effectively deal with a nonpayer. Act 255, which took effect in April, is a change in the law that all lenders should be aware of and understand because it greatly reduces their financial risk when a car is repossessed.
The new law removes that triple liability for lenders (losing the car and its payments and having to pay legal fees) if certain procedures are followed, and it makes repossessing a car a simpler process.
Now the creditor can repossess a vehicle if, among other things, it notifies the debtor of the merchant's ability to recover the vehicle and provides notice that the customer has 15 days to object to the repossession.
Secondly, before picking up the car (and after the 15-day period has expired), the creditor must notify verbally or in writing the local law enforcement agency about the repossession.
The only caveat to lenders and repossession companies is that the new law specifically states the repossession cannot breach the peace, so the tire squealing and the shot of the customer running after the repo agent, which adds drama to movie screen repossessions, will not be seen here in Wisconsin.
With Act 255 now in place, I believe many Wisconsin lenders will start taking repossession steps to protect their investments, and the repo man will be much busier in the days to come. In fact, already several Madison-area lenders are researching the law and determining how repossession can become an important, and less risky, tool in their strategy and policies for dealing with nonpaying consumers.
That's good news for Capital Region lenders and means trouble ahead for consumers who default on their loans.
Act 255 now makes it much easier for Wisconsin banks or lenders to repossess a vehicle when a person isn't making the payments. The law provides a simplified process to use repossession as a method of dealing with nonpayers, and that, in turn, helps lenders reduce associated costs.
The nonpayer benefits by not having to pay additional court costs and good customers potentially benefit in the form of reduced interest rates.
In the past, lenders' hands were tied when it came to taking action on unpaid consumer loans. Unless the consumer who was behind on payments voluntarily surrendered the vehicle, the lender had to go through several legal hoops, including filing a small-claims action to regain the collateral -- the car.
The consumer then had the ability to contest the action and have a trial. If the lender failed to follow these procedures and repossessed the car without going to court first, the consumer could recover the car, the payments made on the car and legal fees, easily costing lenders tens of thousands of dollars.
Additionally, before Act 255, even if the nonpaying consumer voluntarily surrendered the vehicle, without a proper form, there was no guarantee that the consumer would not change his mind later and claim he was forced into giving up the car. Again, that could result in a lengthy court battle and a big potential hit to the lender's bottom line.
These were huge risks that many banks and lenders did not want to take and that left them scratching their heads about how to effectively deal with a nonpayer. Act 255, which took effect in April, is a change in the law that all lenders should be aware of and understand because it greatly reduces their financial risk when a car is repossessed.
The new law removes that triple liability for lenders (losing the car and its payments and having to pay legal fees) if certain procedures are followed, and it makes repossessing a car a simpler process.
Now the creditor can repossess a vehicle if, among other things, it notifies the debtor of the merchant's ability to recover the vehicle and provides notice that the customer has 15 days to object to the repossession.
Secondly, before picking up the car (and after the 15-day period has expired), the creditor must notify verbally or in writing the local law enforcement agency about the repossession.
The only caveat to lenders and repossession companies is that the new law specifically states the repossession cannot breach the peace, so the tire squealing and the shot of the customer running after the repo agent, which adds drama to movie screen repossessions, will not be seen here in Wisconsin.
With Act 255 now in place, I believe many Wisconsin lenders will start taking repossession steps to protect their investments, and the repo man will be much busier in the days to come. In fact, already several Madison-area lenders are researching the law and determining how repossession can become an important, and less risky, tool in their strategy and policies for dealing with nonpaying consumers.
That's good news for Capital Region lenders and means trouble ahead for consumers who default on their loans.
posted by Dave at 11:42 AM
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