Compliance Article
12/14/2007
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For any creditor repossessing vehicles in California, you may want to whip out, dust off, and review the contents of your standard Notice of Intention (NOI). A new case, Juarez et al. vs. Arcadia Financial Ltd, 152 Cal. App. 4th 889 (2007), has provided additional guidance as to what a NOI must contain. While this case may only be binding upon those cases coming out of the Fourth District, creditors should pay attention and may want to consider revising their NOIs to include the information specified by this court.
In Juarez, a case that was certified as a class action, the court held that pursuant to §2982.3 of the Rees-Levering Motor Vehicle Sales and Finance Act, Cal. Civ. Code §§2981 through 2984.5, a NOI to dispose of a repossessed vehicle must inform the consumer of any amounts the consumer will have to pay to the creditor and/or to a third party to reinstate a contract. The NOI must also inform the consumer if, when, and by how much those amounts may increase as a result of additional payments coming due, or as a result of late fees or other fees and charges. In other words, creditors must provide consumers with sufficient information to allow consumers to fulfill all of the conditions to reinstate the contract.
At issue in this appeal was whether a NOI must state the specific amount a consumer must pay for reinstatement in order to comply with Cal. Civ. Code §2982.3(a)(2). The court had to interpret the meaning of the relevant statutory language found in Cal. Civ. Code §2982.3, which requires the NOI to “[s]tate either that there is a conditional right to reinstate the contract until the expiration of 15 days from the date of giving or mailing the notice and all the conditions precedent thereto or that there is no right of reinstatement and provide a statement of reasons therefore.” (italics added). The plaintiffs argued that the NOI must inform the consumers of the amounts they must pay to reinstate their contracts. The defendant argued that the Rees-Levering Motor Vehicle Sales and Finance Act only requires the NOI to provide a general statement of the acts or events that must occur before the contract is reinstated.
The court agreed with the plaintiffs. The NOI must provide the amount the consumer must pay to reinstate the contract and inform the consumer when and by how much the amount may increase as a result of: (1) additional payments coming due, (2) late fees, or (3) other fees and charges. In reaching this decision, the court looked at the intent of the legislature in enacting the Rees-Levering Motor Vehicle Sales and Finance Act. The court determined that the legislature intended the NOI to provide a level of specificity as to the conditions precedent to reinstatement sufficient to inform the consumer—without need for further inquiry—as to exactly what the consumer must do to cure the default. The defendant’s NOI failed to provide that level of specificity.
Doesn’t sound fair to the creditor, does it? After all, the statute doesn’t specify that the amount to redeem and any potential increases in that amount had to be included in the NOI. The real question is what about the hundreds of NOIs that were sent to consumers prior to this decision. What if the pre-Juarez decision NOIs do not contain the required level of specificity? Creditors should analyze Juarez carefully and review their compliance procedures and level of risk. The California Supreme Court denied review of Juarez, but I suspect the Juarez case is not the last of its kind.
