50% of all wrongful repossession claims are caused by the absence of a valid lien or invalid orders due to military-related exclusions or bankruptcies – Harding Brooks Insurance
There is no more gut wrenching feeling than hearing the words “it’s a wrongful.” It is the nails on the chalkboard and the bane of everyone in the collections, forwarding and repossession industries. But it seems to be increasing in frequency and even the CFPB is taking notice. Sad part is, it’s mostly preventable.
Lawsuits
Back in early April, a reputable repossession agency in the state of Michigan found themselves served and the subject of a lawsuit involving the repossession of a vehicle for Westlake Services, LLC which they had assigned to them through a national forwarder.
Why? Simple. Westlake failed to keep track of their title and failed to notice they’d been removed as lienholder.
Look back to 2021 and the same thing happened in California on a TitleMax loan where the vehicle was lien sold a year earlier.
These are just two cases and I’m being kind in not naming the forwarders or agencies, but I am naming the lenders. Why? It is the lenders responsibility to verify that they are the lien holder of every vehicle assigned out for repossession.
This obligation does not simply end when an assignment goes to a forwarder nor does it end when the loan charges off.
According to a quote by Harding Brooks Insurance in an April lender roundtable held by the ARA; 50% of all wrongful repossession claims are caused by the absence of a valid lien or invalid orders due to military-related exclusions or bankruptcies and are not the fault of the repossessor.
Regardless, repossession agencies end up paying half of all of these claims out of pocket to defend them because of weak or absent indemnification in their lender/forwarder contracts.
The CFPB View
Back in 2017, the CFPB published their September 12th by the Consumer Financial Protection Bureau (CFPB), titled the “Supervisory Highlights, Issue 16, Summer 2017”, the CFPB released their findings from examinations of “servicers” overseeing repossession agents and how repossessions are conducted.
Through that work, they identified unfair practices relating to lender practices that had been causing wrongful repossessions on borrowers who had already brought their accounts to a current status.
At that time, the main culprits they were the lenders/forwarders for not closing repossession assignments in a timely enough manner to stop the recovery.
Now, we fast forward to the Spring 2022 CFPB Supervisor Highlights and here we are again. The first two supervisory observations from their July to December 2021 exams listed are; Auto Servicing and Wrongful Repossessions.
This is unacceptable and inexcusable in an era of digital communication.
The Coming Storm
The lending and repossession world is moving into what is probably going to be a painful recession. And, after years of record auto lending, large volumes of repossession activity appears inevitable. The failed processes and procedures that have been resulting in wrongful repossession resulting from lost or unperfected title must come to an end.
It should never be the repossession agencies duty to check title validity. They don’t get paid for that. This lies squarely on the backs of the lending and collections world.
It’s bad enough being involved in a wrongful repossession at any level, but do you want to be the one sitting in a deposition admitting that you didn’t check the title before assignment or at anytime after?
There is nothing more litigious or dangerous that any lending institution does than repossessions. Treat it as such! Be diligent, be vigilant and communicate. Check your damn titles!
The Cardinal Rule – Thou shalt not commit wrongful repossession – Repossession – CFPB
The Cardinal Rule – Thou shalt not commit wrongful repossession – CFPB
The Cardinal Rule – Thou shalt not commit wrongful repossession – Repossession – CFPB
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