Can Lien Holders Repossess Your Vehicle?

When a vehicle owner uses a car to secure a loan, as is typical in a vehicle financing arrangement, the owner authorizes the lender to establish a lien on the vehicle and repossess the car in certain situations. If those situations arise, the lien holder need take only a few steps to legally repossess the vehicle.

Legality

According to the official website of the Scottsdale (Arizona) Police Department, any entity with a valid lien against a vehicle is considered a lien holder and may repossess a vehicle. The website goes on to explain that a lien holder may be any sort of licensed financial institution, including a bank, credit union or acceptance corporation. In addition, a car dealer that provides its own financing may hold a lien and repossession rights.

Requirements

Though repossession requirements vary from state to state and even city to city, the Scottsdale Police Department provides a list of basic requirements that a lien holder must meet to repossess a vehicle. First, the vehicle's title filed with the state division of motor vehicles, or DMV, must identify the party as a documented lien holder, and the lien must still be valid at the time of repossession; a lien for a loan that has since been repaid, for example, would not give the lien holder the right to repossess a vehicle. In addition, the lien holder must provide proof that the person repossessing the vehicle is both a licensed driver and an employee or agent of the lien holder. The person repossessing the vehicle must also have original, notarized documents providing a liability release for local law enforcement officers; this "hold harmless" document should accompany a notarized Affidavit of Repossession and indicate any powers of attorney necessary for the repossession agent. In the absence of these documents, the lien holder or the lien holder's agent must present a valid court order of repossession to legally repossess a vehicle.

Process

The repossession process typically begins with a few missed payments and several late payment warnings from the lien holder, according to the credit services website Fair Debt Collection. The letters typically escalate into telephone calls, and the lien holder may send a final notice indicating an intention to repossess the vehicle. The lien holder or agent may then conduct surveillance on the vehicle and its owner to determine the safest time to retrieve the vehicle, then either tow the vehicle or use a spare key to simply drive it to the repossession office. After repossession, the lien holder or agent sends information on how to reclaim the vehicle; if the owner does not respond or cannot repay the outstanding debt, the agent removes all personal belongings and sells the vehicle at auction.

Considerations

Once a lien holder has repossessed a vehicle, according to Fair Debt Collection, it typically allows only a short time for the owner to respond to notices. If the owner responds, the lien holder may require payment of outstanding debts plus towing charges, impound fees, storage costs, repossession surcharges and a host of other expenses. If the lien holder sells the car at auction and the resulting funds do not entirely pay the outstanding debt, the lien holder may hold the debtor responsible for any remaining balance.