By: Rob Rutkowski, Esquire
Anthrax Research Federal Credit Union (ARFCU) is a multi-state credit union with approximately 15 branches. Jenny Sharp is a loan officer at the credit union. In March, she writes a $3,000 loan to Stanley Sewer for a 1984 Buick Electra. Stanley agrees to repay the loan at $142/mo payable on the 20th of each month.
During this time period, Stanley is chronically late on his payments and at one point he becomes two months delinquent.
Sewer moves out of state in June and the credit union fails in its attempts to contact him. On June 19th, Jenny decides to repossess the car. On the 23rd, Sewer mailed his May payment to main branch (but this is not the branch where the loan originated). The credit union accepts the payment, but the branch where Sewer’s account was maintained is not notified until a week later. On the 28th, Sewer drives in to see Sharp. Jenny is infuriated with Sewer and tells him: “We do not want your business any longer, we want you to take your business elsewhere! Either you pay up the car now or you don’t get your car at all!” Jenny then has two tellers, Larry and Kerry, throw their bodies in front of Sewer’s car to prevent him from leaving. Sewer, being a Dukes of Hazard fan, does a doughnut in the credit union parking lot and manages to elude the tellers as he roars off in his Buick.
Two days later, Jenny, while out shopping one afternoon, happens to drive past the mall and spies the Buick. Sewer was still in town! She quickly calls Skip, her favorite repossession agent, and by the next morning, the Buick is sitting in the credit union parking lot.
Jenny’s satisfaction is short lived however. She puts the car up for auction and discovers that she can only get $200 for it. Worse yet, she later receives a summons and complaint from Stanley Sewer.
Will Sewer’s case go down the drain?
Wrongful repossession is one of the leading reasons that credit unions get sued. There are many different ways that this can happen. This hypothetical situation presents several. First, if a credit union accepts a late payment on a car, it cannot then repossess the vehicle until the loan is again in default and then it has to give notice to the debtor that it will not accept further late payments. Under these facts, by accepting the payment, the credit union waived its right to repossess the car for the particular late payment. In Ohio (and many other jurisdictions) “The acceptance of late payments by a creditor who has the… right to repossess the collateral estops the creditor from lawfully repossessing said collateral after subsequent late payments unless the creditor gives notice to the debtor that, henceforth, strict compliance with the time for payment will be required in order to avert repossession.” See Slusser v. Wyrick, 28 Ohio App. 3d 96, 502 N.E.2d 259 (1986).
There’s also the issue of breach of the peace. In most jurisdictions, a credit union cannot breach the peace in conjunction with a repossession. In Ohio, breach of the peace has been defined to include “an act which is likely to produce violence, which reasonably tends to provoke or excite others to break the peace and which is not performed under judicial process.” See Morris v. First Nat. Bank, 21 Ohio St. 2d 25, 254 N.E.2d 683 (1970). Having tellers launch themselves in front of a car is going to be a breach of the peace. You don’t want to prevent people from leaving the credit union either unless you have a better reason than delinquency.
In the end, ARFCU has exposure here for the parking lot highjinks as well as the later repossession after accepting the late payment. Sewer’s case will definitely pass the smell test.