Car Dealer's Guide to Vehicle Repossession in Louisiana (Part 1)
Whether you own a small local dealership or manage a large regional dealership, everyone in the auto sales industry who dealer-finances will eventually come upon a customer who fails to maintain their payments. This guide will provide a brief overview of Louisiana's repossession laws.
Does the Additional Default Remedies Act Apply to Me?First and foremost, in order to lawfully repossess an automobile, you must be a "secured party". The relevant definition of a secure party is as follow: "a person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding." Put simply, the agreement signed between your dealership and the auto purchaser must grant to the dealership a security interest. Fortunately, the majority of purchase agreements include these provisions, but consult your attorney if you are unsure. A secured party may also be a vehicle lessor for purposes of the Additional Default Remedies Act.
If you are a secured party, you must also qualify under one of the following categories:
(1) Financial institutions chartered under the laws of the State of Louisiana, another state, or the U.S.
(2) Persons licensed or regulated as lenders by the commission of financial institutions pursuant to the Louisiana Consumer Credit Law, R.S. 9:3510, et seq.
(3) Persons licensed or regulated as lenders by the Louisiana Motor Vehicle Commission pursuant to the Louisiana Motor Vehicle Sales Finance Act, R.S. 6:969.1, et seq.
Luckily, most everyone who dealer-finances the purchase of a vehicle will qualify under the third category, but again, if you are unsure, consult your attorney.
The Purchaser Must Be In Default.After you decide that you are a secured party, the vehicle purchaser must be in "Default". Under the Additional Default Remedies Act, "Default" means nonpayment of two consecutive payments on the due date. However, in the event that payments are required to be made more frequently than on a monthly basis, default shall mean nonpayment for a period of sixty days. Generally, the first definition applies to auto loans. So, for example, if you finance a car and the agreement states that the first payment is due on March 12, 2017, then the purchaser will only be in default if he misses both the March 12, 2017 payment and the April 12, 2017 payment.
Did I Send The Party In Default The Correct Notice?After you determine that the purchaser is in default, you must now send said purchaser a Notice. The notice must include the debtor's name, last known address, and description of the vehicle you intend to seize. The notice must also include the following sentence exactly: "Louisiana law permits repossession of motor vehicles upon default without further notice or judicial process."
I recommend sending a formal letter via certified mail with return receipt requested including all of the foregoing so that you can prove the letter was received. (Although the statute only requires that you send the notice, not that they have to actually receive it).
The Repossessor May Not Breach The Peace.In short, when undertaking a repossession, one may not breach the peace. A breach of peace shall include but not be limited to the following:
(1) Unauthorized entry by a repossessor into a closed dwelling, whether locked or unlocked.
(2) Oral protest by a debtor to the repossessor against repossession prior to the repossessor seizing control of the collateral.
Best practice is to get written consent of the party in default before attempting the repossession, although, admittedly this is not always easy or even possible.
Get A Licensed Towing Company.In almost all repossession cases a tow truck is inevitably involved. You must be sure that the company you hire possesses a common carrier certificate issued by the Louisiana Public Service Commission that allows them to do non-consensual tows. Do not be afraid to ask your towing service to provide proof of their credentials.