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What is Repossession? When you buy goods on credit, (for example a car) often the money loaned to you is secured by a mortgage over the goods. The lender takes the goods as security so the lender can take them from you and sell them if you default in paying the loan. When can the lender repossess the goods? Goods bought on credit can only be repossessed if: - There is a mortgage or a lease
AND - You have "defaulted" on the loan agreement (for example, failed to make repayments, failed to keep the goods insured etc.)
AND - You have been given a notice by the lender (required in most cases) that you are in default of the loan, have 30 days to fix the problem and you did not fix the problem within that time.
A court order is required as well (where the goods were purchased for personal, rather than business, purposes) if: - The mortgaged goods are on private property and you have not agreed to the lender entering on that property to take the goods; and/or
- Where a large part of the loan (75% or more) has been repaid.
Jerry's Problem Jerry had a car loan with a major finance company. The car loan was secured by a mortgage over Jerry's car. Jerry had a lot of bills come in at once and he could not afford to make the repayments on his car loan. A few weeks after Jerry missed a payment he received a letter from the finance company. The letter stated that Jerry was in default on his loan contract. He had 30 days to make the repayments he had missed; otherwise the finance company would take his car and/or begin court action against him. Jerry ignored the notice. Now the car has been taken and Jerry wants it back. He is trying to negotiate with the finance company without success. They want all the arrears, the payment due next week and enforcement expenses. They tell Jerry he has left it too late — he should have contacted them to negotiate an arrangement as soon as he knew he was having financial difficulties. |
Important: Don't ignore any letters you get in the mail. If you don't know what to do phone Consumer Credit Legal Centre for legal advice. See Getting Help below. What can I do before repossession happens? Paying the arrears is always the best option if this possible. However, you should contact the lender to determine the total amount that will need to be paid to prevent the repossession, in case you have missed another payment. If paying is simply not possible, you should see Fact Sheet: Can't Pay Your Loan? for other possible options. What can I do if my car/goods are being repossessed? Some suggestions are: - The lender does not have the right to enter on private property to repossess the car/goods without your written consent or a court order.
- Take a picture of the car/goods before it is repossessed as proof of the condition of the car
- Get your personal possessions out of the car
- When the goods have been repossessed check the value. For example, in the case of a car, look in local trading newspapers to see what other cars of similar age and condition are being sold for or you could phone NRMA.
What can I do after my car/goods have been repossessed? The lender must serve you a written notice within 14 days of the repossession of the car/goods stating: - The date the goods were taken
- The estimated value of the goods
- The enforcement expenses incurred to date and any other enforcement expenses accruing (such as the daily storage rate for the car)
- A statement of your rights
- The lender cannot sell the goods until 21 days after the date of the notice.
If you pay the amount of the arrears, any further payments now due, and the enforcement expenses the lender must return the goods to you. If the enforcement expenses claimed seem too high, check your contract and get legal advice. Sale of goods If payment is not made within 21 days, the lender must sell the goods as soon as possible for the best price reasonably obtainable. Once the goods are sold, the lender must send you a notice stating: - The amount the goods sold for
- The net proceeds of the sale (being the amount the goods sold for less the lender's expenses for arranging the sale)
- The amount required to pay out the loan
- Any further recovery action to be taken by the lender against you
Warning: Once the goods have been sold all of the remainder of the loan that is owed becomes due to be paid immediately. The lender does not have to agree to any repayment arrangement.
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