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Creditor Tries to Repossess Car With People In It!

A federal court judge refused to throw out a case against a debt collector who tried to repossess a car while the people were still in it! Smith v. AFS Acceptance, 2012 U.S. Dist. LEXIS 75976 (N.D. IL 20012). The case happened in Illinois, but has implications nationwide, including California, since the judge was interpreting the Fair Debt Collection Practices Act, which regulates debt collectors nationwide.

Rosalind Smith got a car loan from AFS Acceptance. When she defaulted on her car loan, AFS hired EquitableServices to repossess. The problem is AFS tried to repossess the car while people were in it! Whenequitable began hooking up the car to tow it away, Smith and her daughter jumped in it. The police arrived on the scene while the repossession was happening and two women were in the car. Thepolice officers stopped the repossession and told Equitable to leave the car in the driveway.

AFS asked the judge to throw the case out, but the judge refused.

1. Wrongful Repossession

First, AFS wanted to the judge to throw out the claim that it had violated the wrongful repossession statute, arguing that it wasn't responsible for the actions of who it hired to repossess. The judge reasoned that under Illinois' Repossession Statute, AFS had the right to repossess so long as they did so without breaching the peace. 810 ILCS 5/9-609(b)(2). And that Comment 3 to the Repossession Statute states, "In considering whether a secured party has engaged in a breach of the peace, however, courts should hold the secured party responsible for the actions of others taken on the secured party's behalf, including independent contractors engaged by the secured party to take possession of collateral." 810 ILCS 5/9-609810 , Comment 3 (emphasis added). According to Comment 3, a secured party may be liable for the actions of another, even if no agency relationship exists."

In refusing to dismiss the wrongful repossession claim the court also cited two other cases. See Thompson v. Gateway Financial Services, Inc., 2011 WL 1429207, at *2 (N.D. Ill. Apr. 14, 2011)(relying on Comment 3 to find that the secured party may be liable for actions taken by independent contractor with no agency relationship); Williams v. Republic Recovery Service, Inc., No. 09 C 6554 , 2010 WL 3732107 at *3-4 (N.D. Ill. Sept. 16, 2010).

2. Violation of the Fair Debt Collection Practices Act (15 U.S.C. 1692f(6))

The Fair Debt Collection Practices Act (Section 1692f(6)) prohibits "[t]aking or threatening to take any nonjudicial action to effect dispossession or disablement of property if - (A) there is no present right to possession of theproperty claimed as collateral through an enforceable security interest; (B) there is no present intention to take possession of the property; or (C) the property is exempt by law from such dispossession or disablement."

Simply put, Smith's lawsuit alleged that AFS and Equitable "did not have a present right to possession of the vehicle" because Equitable's "attempt to repossess the vehicle "constituted a 'breach of the peace' in violation of 810 ILCS 5/9-609(b)(2)."

"In other words, if the debt collector violated the self-help repossession statute, by breach of the peace or otherwise, then the collector had no present right to possession of the property under §1692f(6)." Fleming-Dudley v. LegalInvestigations, Inc., No. 05 C 4648, 2007 WL 952026, at *5 (N.D. Ill. Mar. 22, 2007)."

Under Illinois law, "breach of the peace" as used in the statute "connotes conduct which incites or is likely to incite immediate public turbulence, or which leads to or is likely to lead to an immediate loss of public order and tranquility." Chrysler CreditCorp. v. Koontz, 661 N.E.2d 1171, 1173 (Ill. App. Ct. 1996).

Here the repossession agents started to tow the car out of the driveway with people in it. Throughout the incident, Smith's family, and neighbors yelled at the agents to stop towing the vehicle away with individuals in the vehicle andthe vehicle's doors open. One could only imagine what the repossession agent intended to do with the bodies once he got to the tow yard!

The judge concluded Smith alleged enough concerning breach of the peace for her claim to stand. While plaintiffs certainly played a role in any breach of the peace, nothing in the language of the statute suggests that fault for any breach of the peace must lie with the party doing the repossessing.

The court also went on to refuse to dismiss Smith's claim that AFS intentionally inflicted emotional distress.