The class action lawyers have found a new cause of action against banks, failure to send proper notice of a repossession sale. The first such class action lawsuit in this region was filed last week in southern Indiana. That cause of action is attractive to plaintiffs’ attorneys because if the notice of sale is insufficient there is an automatic penalty under UCC Article 9-625.
Most lenders know the deficiency may be eliminated if they do not follow the proper sale procedure, but they don’t realize they may also have to pay money to their debtor whose car or other collateral they repossessed. Under 9-625, if the lender fails to properly comply with the notice requirements for the repossession sale of consumer goods collateral, the debtor may recover from the lender a sum equal to the finance charge plus 10% of the cash price of the collateral or the principal amount of the loan. In a suit for a class of consumers, that can be a substantial sum.
The protection for secured parties from these lawsuits is also found in UCC Article 9. 9-614 specifies the required contents of notification before disposition of collateral in a consumer goods transaction. It also provides a model form “Notice of Our Plan to Sell Property” that is per se compliant with the notice requirements. The secured lender getting ready to sell repossessed consumer goods needs only to correctly fill in the blanks of the statutory form.
If you have any questions about whether the notice you are using for repossession sales of consumer goods meets the requirements of Article 9-614, contact your counsel.
