California Auto Loan Only

It is important to be uniformed in our dealing with borrowers. The purpose of this section is to provide guidance. Section is intended for consumer auto loans not in bankruptcy or any other legal proceedings. This information should be used in conjunction with verification of the California Civil Code.

Consumer Vehicle Collections/Recovery:

When the loan becomes 10 days past due, the bank shall attempt to make contact with the borrower and/or co-signer via telephone. If the borrower and/or co-signer does not answer the telephone, a message to contact the bank should be left. This should be repeated every other day for the first two weeks and twice a week the third and fourth weeks. All attempts to communicate and actual communications with the borrower and/or co-signer shall be documented. Dates, times, and disposition of the call with the borrower should be noted.  

Although there is no law that specifically limits the number of calls made to a borrower or co-signer, it does clearly state it is in violation of the law for repeated calls over a short period of time, which may be considered annoying or harassing. There is no definition as to “a short period of time” but as a general rule, a short period of time is referred to in a day, such as 10 minutes apart.

If the loan becomes 30 days past due and the borrower and/or co-signer has not communicated with the bank regarding the delinquent account, the bank should take the next step and send out a Notice of Repossession to the borrower and co-signer. The Notice of Repossession should be provide the borrower and co-signer at least 10 days to bring the loan current or make arrangements to bring the loan current. It should clearly state failure to do so may result in the vehicle being repossessed and that the borrower and co-co-signer will be liable for all costs, which may include, but not limited to, repossession fee, storage fees, inspection fees, and legal fees.  

Promises and Broken Promises:

There are many reason why a borrower becomes delinquent on an auto loan. Too many to list. It is important to have a dialog with the borrower to ascertain the reason why the delinquency. The bank will need to determine if it could assist the borrower by offering a one-time payment deferral. However, it must determine if the payment deferral is just a short term fix to an on-going financial problem, such as the borrower accumulated too much debt. Also, it should look at the co-signer as the primary source of repayment, if there is a co-signer.

It is important to document all communication, including promises made by the borrower and/or co-signer and all broken promises and the excuse given. Promises to pay must be specific so there are no misunderstandings. You must document the person you had spoken to, the dollar amount and the date promised.

There are times when the borrower must break a promise because of unforeseen and immediate financial issues that arise. On the other hand, there are borrowers that will tell you what you want to hear to prolong further collection action.

If the borrower and/or co-signer fails to pay when promised, one last call to the borrower and/or co-signer should be attempted. If the attempts are unsuccessful, the Notice of Repossession should be sent. However, if the borrower and/or co-signer failed to honor the promise because of a Notice of Repossession, the bank should proceed with the repossession process.

Vehicle Repossession:

Once the vehicle is repossessed, Notice of Intent to Dispose must be sent to the borrower to either redeem or reinstate. State of California has certain laws and regulations on reinstatement and redemption of the vehicle, which is located under section 2983.2 and 2983.3 of the California Civil Code.

General Guidelines:

Notice must give borrower and/or co-signer 15 Days for Redemption or Reinstatement

Extension period 10-days   - Borrower must request in Writing with certain requirements

Co-Signers:

Is there a Co-signer on the contract? It is important to give written notice to the co-signer prior to repossession. If the last known address of the co-signer and borrower are the same, a single written notice of delinquency addressed to both at the same address satisfies the requirement. Addition important information is located under section 2983.35 of the California Civil Code.   

Notice of Deficiency Balance:

If the borrower fails to reinstate or redeem the vehicle and it was sold at auction, the bank must sent a Notice of Deficiency. The notice should include the previous facts, which includes date of repossession, date of the Notice of Intent to Dispose letter sent, date vehicle was sold at action, and the amount the vehicle was sold. The letter must include a detailed breakdown of all balances and costs, which should include, but not limited to, (Sample)

Principal balance:

Interest balance:

Late fees:

Repossession costs:

Reclaiming costs:

Storage:

Transportation fee:

Auction fee:

Legal fee:

Other:

Total Legally Outstanding

Amount Vehicle Sold:

Total Deficiency Balance:

The notice must be sent to the borrower and/or co-signer. The bank should offer reasonable repayment terms, but not required. The bank should give the borrower and/or co-signer 10 days to either pay the deficiency in full or request a reasonable repayment plan.

Assignment to Legal:

If the borrower and/or co-signer has failed to pay the deficiency balance, the bank should retain legal counsel. The bank must provide the attorney with all notices, which must include, but not limited to, Notice of Repossession, Notice of Intent to Dispose, and Notice of Deficiency Balance.

California Civil Code References:

2983.2                 Notice

2983.3                 Redemption or Reinstatement

2983.35                Co-Signer