When a person takes out a car on a lease or purchases the car using a loan, he is required to make regular payments to the company that owns the car or the one that fronted him the money to buy it. If he fails to do so, he may face the car's repossession. Generally, if the repossession company damages the car in the course of repossessing it, it is liable for the damage.
Repossessions are legally allowed for in the language of contracts for secured loans. When a person takes out a loan to purchase an object, he becomes the legal owner of it. However, if the person does not pay back the loan according to the terms he agreed to, the company holds the right to take back the property purchased by the loan. For example, a company may seek to repossess a car.
When a person is in default on a car, he still legally own the vehicle. However, the company that made him a loan to buy the car has the legal right to repossess the vehicle. After a repossession company repossesses the vehicle, it is no longer the car owner's but is now the property of the lender.
When a car is repossessed by a lender, liability for the car and damages made to it transfers to the lender as well. So, if a repossession company damages the car in the course of repossessing it, then the company is legally responsible for the damages. This is because it is acting as a proxy of the lender. While the lender may absorb the costs of the damage, it will likely pass them on to the repossession company.
In many states, a repossession company can legally pass on any costs it incurred during the repossession to the person who defaulted on the car loan. However, during the course of repossession, the company should not have to damage the vehicle. Therefore, damage to the vehicle—unless partially caused by its owner—cannot be considered a cost of the repossession and cannot be passed on the vehicle's original owner.
- "Fair Debt Collection"; Robert J. Hobbs and Carolyn L. Carter; 2008
- Federal Trade Commission. "Vehicle Repossession." Accessed April 7, 2020.
- Consumer Financial Protection Bureau. "If I Can’t Make My Auto Loan Payments, Will My Vehicle Be Repossessed?" Accessed April 7, 2020.
- Commonwealth of Massachusetts. "What to Know if Your Car Is Repossessed." Accessed April 7, 2020.
- Los Angeles County Consumer & Business Affairs. "Vehicle Repossessions." Accessed April 7, 2020.
- Experian. "How Long Does It Take for a Repossession to Come off Your Credit?" Accessed April 7, 2020.
- Association of the Bar of the City of New York. "Repossession." Accessed April 7, 2020.
- Experian. "Collection Accounts for Repossessed Car in Credit Report." Accessed April 7, 2020.
- Consumer Financial Protection Bureau. "My Car Has Been Repossessed, and I Was Told It Will Be Sold. What Can I Do?" Accessed April 7, 2020.
- Justia. "Vehicle Repossessions and Bankruptcy." Accessed April 7, 2020.
- Consumer Financial Protection Bureau. "What Happens If I Left Some of My Personal Possessions in My Vehicle When It Was Repossessed?" Accessed April 7, 2020.
- Georgia Consumer Protection Division. "Repo Company Charging to Return Belongings Left in Vehicle." Accessed April 7, 2020.
Michael Wolfe has been writing and editing since 2005, with a background including both business and creative writing. He has worked as a reporter for a community newspaper in New York City and a federal policy newsletter in Washington, D.C. Wolfe holds a B.A. in art history and is a resident of Brooklyn, N.Y.