An earlier post details the two rights a California consumer generally has to get his or her car back following repossession or voluntary surrender of a car. To recap, the first right is to “reinstate” the car loan by paying all amounts past due, plus any applicable delinquency charges, collection and repossession costs. The second right is for the consumer to “redeem” the vehicle by paying the loan balance in full, plus any applicable delinquency charges, collection and repossession costs.
Reinstating the loan generally costs the consumer less than redeeming the vehicle. There are, however, certain circumstances under which a creditor can deny a consumer the right to reinstate, leaving redemption as the only option.
We are seeing an increasing number of creditors denying consumers the right to reinstate their loans. California consumers should be aware that a creditor cannot deny the right to reinstate merely because the consumer is behind on his or her payments. This is true no matter when the consumer misses a payment during the term of the contract, and no matter how many payments the consumer fails to make. California law allows a creditor to deny reinstatement only in the following instances:
- The buyer has reinstated once before in a 12-month period or two times during the term of the contract.
- The buyer or any other person liable on the contract intentionally provided false or misleading information of material importance on his or her credit application.
- The buyer, any other person liable on the contract, or any permissive user in possession of the motor vehicle, in order to avoid repossession has concealed the motor vehicle or removed it from California.
- The buyer, any other person liable on the contract, or any permissive user in possession of the motor vehicle, has committed or threatens to commit acts of destruction, or has failed to take care of the motor vehicle in a reasonable manner, so that the motor vehicle has become substantially impaired in value or may become substantially impaired in value.
- The buyer or any other person liable on the contract has committed, attempted to commit, or threatened to commit criminal acts of violence or bodily harm against an agent, employee, or officer of the creditor in connection with the creditor's repossession of or attempt to repossess the motor vehicle.
- The buyer has knowingly used the motor vehicle, or has knowingly permitted it to be used, in connection with the commission of a criminal offense, other as a consequence of which the motor vehicle has been seized by a federal, state, or local agency.
- The motor vehicle has been seized by a federal, state, or local public agency or authority pursuant to a law which essentially precludes the return of the vehicle to the buyer or any other person liable on the contract.
It also is important to note that in any court action, the creditor (not the consumer) must prove that the denial of the right to reinstate was justified in that it was reasonable and made in good faith.