The repo man is getting busy

A unique form of collection

Miss a credit card payment or an electric bill and companies bump down your credit score or cease service. Fail on the mortgage and a judge can issue a foreclosure notice. But skip a car payment or the full insurance and a guy in jeans can hook a chain to your car and tow it away, no court hearing required.

"If you think about it, that's a pretty drastic remedy," said Nancy Barron, a consumer lawyer in California who specializes in auto claims.

Outside California and Florida, repo agents don't need licenses, although lenders typically require insurance, and several industry trade groups have strived to improve professionalism in the industry, saying most repossessions go quietly and without incident.

Most repossessed autos are sold at dealer auctions, an average of 41 days after the repossession. The Federal Trade Commission requires that vehicles be resold in a commercially reasonable manner (for more, see this FTC fact sheet).

"After 90 days, we have to classify it as a bad debt," said Mark Pregmon, executive vice president of SunTrust Bank. "Do we want to repo the car? Absolutely not . . . but that money's not free. That money costs something."

BenchMark estimates the average loss to subprime lenders at $6,000 a car.

Owners are required to pay any deficiency -- the difference between what was fetched at auction and the outstanding loan -- as well as fees for repossession, cleaning, transport and resale, which can total about $700.

Many borrowers are stuck paying for years on a car they no longer have. To make matters worse, a replacement car costs more to finance. Even one 30-day past-due payment can ding a buyer's credit score nearly 100 points.

If you fear the repo man . . .

State laws do protect consumers (check your state attorney general's office for guidelines), and experts can help. Here are a few tips, in descending order of crisis:

Your car has been repossessed. This is not, in fact, the end. If the lender did not conform to your state's notification laws, a penalty can be issued against the lender's ability to collect. Contact a consumer lawyer or advocate for help. The National Association of Consumer Advocates maintains a listing.

Some states require that owners be given a chance to make good before the car is repossessed.

"In every state the consumer has a right to redeem the car, to pay all that is due and the expenses to get the car back," said Jon Sheldon, a lawyer with the National Consumer Law Center. "That will often be a much better deal than letting the creditor sell it."

Act quickly. Many auctions are closed to individuals, and actions become more difficult after a sale.

Though prices vary widely, the average difference between the auction price and retail resale is about $1,500, said Kontos of Adesa.

The repo man is at your door. If this happens, you can legally object, said Sheldon. Be polite but firm, and avoid anger or violence. "If you're objecting and they take it anyway, then it could lead to a breach of the peace," which is illegal in every state, he said. This can buy you time to work out the problem with the lender.

Avoid any physical confrontation. Instead, document everything. Write down license-plate numbers and names, including those of witnesses.

Remove personal items from the glove compartment and car. "Anybody who's late in their payments should remove all their belongings," said Yvonne Rosmarin, a consumer lawyer in Massachusetts. "I don't know how many people I've heard stories from who have had personal belongings in there that just disappeared."

If you are on active military duty and you bought the car before you went on active duty (you were in the reserves, for example), a creditor cannot repossess the car without a court order, under federal law.

Continued: Get a written record

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