The Consumer Financial Protection Bureau (CFPB) has begun actively evaluating the practices of vehicle repossession firms around the handling of personal property recovered from a repossessed vehicle.
In its Fall 2016 Supervisory Highlights report, the bureau acknowledged it was examining the practice. State law typically requires auto loan servicers and repossession companies to maintain borrowers' property so that it may be returned upon request, according to the report. Some companies charge a fee for the cost of returning the property, while others dispose of the property and charge the borrower a fee.
CFPB examiners concluded that it was "an unfair practice to detain or refuse to return personal property found in a repossessed vehicle until the consumer paid a fee or where the consumer requested return of the property, regardless of what the consumer agreed to in the contract," according to the report.
In some instances, consumer agreements and state law support the lawfullness of charging a fee, but the agency's examiners concluded that the firms shouldn't refuse to return the property until after the consumer paid the fee. The firms should instead add the fee to the borrower's balance, according to the report.
In some cases, companies were charging a borrower for storing personal property recovered from the vehicle, a practice the agency called unfair because the fees were not disclosed.
It is the responsibility of the repossession agent to remove all personal property before a vehicle reaches an auto auction, said ServNet's CEO Pierre Pons.
"On the rare occasions where personal property is left in the vehicle when it gets to the auction — depending on what it is — it may be destroyed (as in PPI) or cataloged and secured for the specified period of time required by state law, and available for claim by the debtor," Pons said. "Under no circumstances, that I know of, would an auto auction charge a debtor to retrieve their personal property. It is, in fact, promptly returned."
Read the full report here.