Creditors who seek to repossess a vehicle in Illinois must give the debtor clear notification in advance of their actions.
So says the Illinois Appellate Court, which has reinstated a lawsuit accusing a Chicago used-car dealership of failing to send proper repossession notices to buyers who default on their loans.
The plaintiff's attorney called the decision important to lenders and consumers. 'You're going to be held to the requirements of clarity,' said Jonathan Nachsin of Chicago. 'Are you going to sell it or keep it? If you're going to keep the collateral, you've got to give notice that the debtor or consumer can understand.'
CASE BEGAN WITH '95 SALE
Nachsin represents Catherine Patrick, who bought a 1987 Cadillac Fleetwood for $6,995 plus finance charges in 1995 from Wix Auto Co. The installment contract required her to maintain insurance.
A month after the purchase, Wix repossessed the car for lack of insurance. Patrick sued the dealership, but a judge dismissed the case without trial.
The Illinois Appellate Court in Chicago reversed that decision, ruling Wix's repossession notice violated the Illinois Commercial Code.
The law 'contains specific requirements for a strict foreclosure,' Judge David Cerda said, and a creditor who chooses to keep the collateral as full satisfaction of the debt must comply with the law. 'The written notice must clearly and explicitly inform the debtor that the creditor is retaining the collateral,' he said.
The Wix notice, the appellate court said, was deficient because it was 'confusing, contradictory and failed to inform her that Wix proposed to retain the automobile in full satisfaction of the debt.'
Nachsin said he does not know how many other consumers received the same defective notice from Wix, but said: 'We believe it numbers in the hundreds at least.'
The Uniform Commercial Code provides for damages based on the loan amount if a secured party fails to comply with the notification requirements, he said.
Nachsin said the trial judge must now decide whether to certify the case as a class-action lawsuit.
Defense lawyers for Wix did not return phone calls seeking comment, but did notify Nachsin that the dealership is petitioning the Illinois Supreme Court to review the decision.