Newspaper article St Louis Post-Dispatch (MO)

The Reasons Fraud Is So Hard to Prove

Newspaper article St Louis Post-Dispatch (MO)

The Reasons Fraud Is So Hard to Prove

Article excerpt

Q: If your car gets repossessed, does the finance company have to sell it? If so, is there a minimum price they have to get? Is it legal for them to sell it to their friends for next to nothing?

A: Let's limit the discussion here to consumer goods, because there are different rules for repossessions of other things.

If you have paid 50 percent of the cash price or the loan (which it is depends on whether your contract was originally set up as an installment sale or a loan), the creditor who repossessed your car would normally have to sell it. The sale would have to happen within 90 days. The creditor could keep the car only with your written permission, given after you went into default.

The reason for this law is that the car may be worth more than you still owe, and you will get whatever is left from the sale proceeds after the debt has been paid. If the car is sold for $5,000, but you only owe $1,000, you'll get the surplus of $4,000 (minus the seller's reasonable expenses).

If you haven't paid 60 percent, the creditor can propose to keep the car in satisfaction of the debt. It must send you written notice. If you object, then the creditor must sell the car.

There is no minimum price the creditor has to get. The only limit on what the creditor does is that its actions must be "commercially reasonable." An extremely low price might be evidence that a sale was not commercially reasonable, but it would not automatically lead to that conclusion.

If the creditor sold the car to one of its friends for "next to nothing," and the car was worth a lot more, I think you would have a good argument that the sale was not "commercially reasonable." But the decision would be up to the court.

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Q: In earlier columns you have talked about the "implied warranty of merchantability." This is a warranty created not by a contract but by the law. I believe you said it is a warranty that goods be of decent quality.

Does this warranty apply to used goods, like used cars? …

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