In California, a consumer generally has two rights following a car repossession.
The first right is to “reinstate” the contract by paying all amounts past due, plus any applicable delinquency charges, collection and repossession costs. Depending on the basis for the repossession, the consumer may be required to satisfy any liens or encumberances on the car or obtain insurance. Upon reinstatement, the car will be returned to the consumer and he or she will begin paying on the contract as if there was no default and repossession.
The second right is for the consumer to “redeem” the vehicle. This generally means that the consumer will have to pay in full the balance due under the loan, plus any applicable delinquency charges, collection and repossession costs. There can be a credit to the consumer for any unearned finance charge or canceled insurance, depending on the terms of the purchase contract. Upon redemption, the car is returned to the consumer and he or she owns it, having paid off the loan.
Reinstating the contract generally costs the consumer much less than redeeming the vehicle, and thus is the more desirable and sometimes only option based on the consumer’s financial situation. There are certain, limited circumstances under which a creditor can deny a consumer the right to reinstate the contract, leaving redemption as the only option.
Creditors must provide consumers with detailed written notice of their right to reinstatement and/or redemption. The written notice must be accurate and include complete disclosure of all charges and other information necessary for the consumer to reinstate the contract or redeem the vehicle. If the creditor does not provide the required notice in the proper form, the consumer will not owe a deficiency balance (the amount remaining on the contract after the sale of the vehicle). In addition, the consumer may have a claim for damages against the creditor.