Repossession: Consumer Rights and Lender Obligations

Maryland law provides a process by which a lender may repossess goods securing a loan.  For example, assume a person obtains a loan to person to buy a vehicle and that loan is secured by the purchased vehicle.  If that purchaser does not live up to the repayment provisions of that loan, the lender may repossess that vehicle.  The legal term for not repaying the loan is “default.”  Generally, a borrower is in default if that borrower fails to make a payment due under the loan’s terms.   

At least 10 days before repossessing the goods that secured the loan (in this case the vehicle) on which the borrower defaulted, the lender MAY, in writing, inform the borrower of his intent to repossess the goods.  If the lender does not send one of these discretionary notices, they cannot charge the borrower any repossession expenses.  Regardless of whether the lender informs the borrower of their intent to repossess the goods, within 5 days after a lender repossess goods, that lender must send or deliver to the borrower a notice.  The notice must briefly state the right of the borrower to retake possession of the goods and the amount payable for them. (Retaking possession of the goods is legally referred to as redeeming the goods).  The notice must also state the right of the borrower as to a resale and the borrower’s liability for any deficiency.  (Resale is the sale of the borrowed goods by the lender.  The proceeds of the sale are used to pay the deficiency.)  Further, the lender must inform the borrower where the goods are stored and the address where any payment is to be made.  The lender cannot sell or dispose of the goods for at least 15 days after such written notice.

During this 15 day period, the borrower may redeem and take possession of the goods and resume performance of the loan agreement.  Basically, to redeem the goods, the borrower must pay any amounts due under the loan agreement.  Further, if the lender provided advance notice, the borrower must pay the expenses of retaking and storing the goods.

If the borrower does not redeem the goods, the lender may sell the goods at a private or public sale.  At least 10 days before the sale, the lender must notify the borrower in writing of the time and place of sale.  If the goods are sold at a private sale, the lender must, in writing, provide the borrower a full accounting of the sale.  The Commissioner of Financial Regulation may determine that the sale was not done in a commercially reasonable manner and enter an order disallowing any claim for a deficiency balance.  If the goods are sold at a public sale, the lender must provide the borrower a written statement showing the distribution of the sale proceeds.

Finally, the lender is not required to sell the goods.  Rather the lender may keep the repossessed goods.  If the lender keeps the goods, the borrower is discharged from all obligations.

If the lender does not follow these requirements, they are prevented from collecting a deficiency judgment from the borrower.

A Vehicle Buyer's Protections When Financing Is Not Approved

If a consumer buys or leases a motor vehicle from a dealer and the dealer arranges for the consumer to receive financing through a third party, Maryland law provides both the consumer and the dealer certain protections.  When a consumer buys a vehicle, both the consumer and the dealer must sign a dealer provided notice that discusses your legal protections.   

That notice should inform the consumer that if the third party finance company does not approve the financing within 4 days of the delivery of the vehicle to the consumer, the dealer must notify the consumer in writing that the financing has not been approved.  Upon receiving this notice, the consumer or the dealer may cancel the lease or sale.  Alternatively, the consumer and the dealer may agree on new financing terms.

If the consumer or the dealer cancels the sale or lease because of financing, the dealer must immediately return all money paid to the consumer.  This includes the down payment, any subsequent payments, all taxes, fees (including titling fee), and any other charges assessed.  If the consumer traded in a vehicle, the traded in vehicle must be returned to the consumer in the same condition in which it was when delivered it to the dealer.  Furthermore, the dealer is not permitted to charge the consumer for use of the vehicle.

Of note, within two days of receipt of the notice that financing was not approved, consumers must return the vehicle to the dealer.  Except for normal wear and tear, the vehicle must be returned in the same condition in which it was when the consumer received it.  If the consumer does not return the vehicle, the dealer may repossess it.  However, even if the vehicle was not returned to the dealer a consumer may be able to collect financial damages.

Consumer Protections for Buyers of Used Cars

In Maryland, if you buy a used vehicle and it turns out to be a lemon there are various laws that may protect you.  For example, unless the dealership states otherwise in a written contract, your vehicle comes with an implied warranty that the vehicle is fit for transportation i.e. the vehicle is drivable.  A waiver of the implied warranty has to be in writing and signed by the customer.  If your vehicle has less than 60,000 miles on it and it is less than six years old, a car dealership cannot sell you a vehicle without the warranty that the vehicle is fit for transportation.  In addition, according to the Federal Trade Commission, dealers that sell more than five vehicles a year must post a buyer’s guide in every used vehicle that is offered for sale.  The guide must state whether the vehicles is sold as is or with a warranty and what the warranty covers. 

Even if you buy a used vehicle, depending on how old your vehicle is and how many miles are on the vehicle, the manufacturer’s warranty may still cover defects with your vehicle.  The Magnuson- Moss Warranty Act prohibits manufacturers from waiving an implied warranty or conditioning a warranty on the use of certain brand name products, unless they are given permission to do from by the Federal Trade Commission.  This means that if you buy a used vehicle, unless the manufacturer offers to fix items for free, you can use the mechanic of your choice and non-brand name products, such as transmission fluid, as long as they are equivalent to what the dealer instructs you to use.  To verify that a manufacturer’s warranty is still in place, get the vehicle identification number (VIN), and call the manufacturer to verify.  In addition to the manufacturer’s warranty, you may be able to purchase a warranty from the dealer to protect you against any defects that may arise.  A warranty bought from a dealer would be in addition to the manufacturer’s warranty and not replace the manufacturer’s warranty.

Moreover, when selling a vehicle, a dealer cannot make a material misrepresentation.  In addition, dealers have to let the consumer know if there vehicle was used for anything other than a consumer good, e.g. was it used as a taxi or used for business purposes.

As a precaution, prior to buying a used vehicle, you should have a mechanic that you trust inspect the vehicle.  You should also run a vehicle history report.  If you get a vehicle history report through the Motor Vehicle Administration (MVA) the report may tell you if the vehicle was damaged beyond market value or was stolen. This can alert you to problems that your car may have. 

The Outcome of an Administrative Hearing for a DUI/DWI

If you are charged with driving under the influence or driving while intoxicated, your license will be taken by the police and you will be issued a temporary license that lasts 45 days.  On the 46th day your license will be suspended.  To continue driving, you can fight your suspension in an administrative hearing or enter the ignition interlock system.  You can extend the length of your temporary license to the date of your administrative hearing, by asking for a hearing within 10 days of being charged. You have 30 days to request an administrative hearing, but the 45 day time limit of your temporary license will not be extended if you request your hearing after the 10th day.  

When a driver enters the ignition interlock program, he or she can only drive cars that are equipped with an ignition interlock system.  These systems prevent a car from starting until the driver has breathed into a device and the device has determined the driver is sober.  The driver will have to breathe into the device periodically while driving. Typically, there is an installation cost and a monthly service fee with the ignition interlock program.  The driver will need to breathe into the interlock system at least 50 times per month or explain to the Motor Vehicle Administration why he or she was unable to breathe into the device 50 times a month. Drivers in the interlock program, must file a monthly report with their interlock system provider so that providers can make sure that drivers are complying with the program. 

If having your license suspended or only being able to drive cars equipped with ignition interlock systems is not acceptable, you can request an administrative hearing.  In an administrative hearing, the judge does not have to allow you to participate in the ignition interlock program.  You are only guaranteed entry into the program if you enter into the program prior to the hearing. At the hearing, the administrative law judge can decide to suspend your license, allow you to enter into the ignition interlock program, enter the ignition interlock system and allow you to drive work vehicles that are not equipped with ignition interlock devices, or find that your license should not be suspended.  If you can show that the officer induced you into refusing the chemical test by providing misinformation you can beat the suspension. 

At the hearing, the only facts the administrative law judge will consider are:

1. Whether the police officer had reasonable grounds to believe you were driving or attempting to drive while under the influence of or impaired by alcohol or drugs;

2. Whether there is evidence that you used alcohol or drugs;

3. Whether the police officer advised you of administrative sanctions before requesting the in-station chemical breath test;

4. Whether you refused to take the test;

5. Whether you drove or attempted to drive while having a alcohol concentration of 0.08 or more;

6. Whether you drove or attempted to drive while having an alcohol concentration of 0.15 or more; and

7. If the hearing involves disqualification of a commercial driver’s license, whether you were operating a commercial motor vehicle or held a commercial driver’s license.

Refusing to Take a Chemical Test When Pulled Over for a DUI/DWI

In Maryland, if an officer pulls over a vehicle and suspects that the driver was driving while impaired or under the influence of drugs or alcohol, the officer will ask the driver to take a variety of tests.  Drivers can refuse all of these tests.  Except for the chemical breath test in the police station, drivers will not be penalized for refusing to take these tests. 

Maryland is an implied consent state.  This means that if a driver was lawfully stopped and detained by an officer, and the officer had probable cause to believe the driver was impaired, at the request of the officer, the driver must either take a chemical breath test at the police station or have their license suspended. 

The suspension is an administrative penalty that is not related to any criminal penalties that a driver may face.  The suspension will begin 45 days after the incident, unless the driver requested an administrative hearing within 10 days of being charged.  If the driver requests an administrative hearing within 10 days of being charged, their license will be suspended on the day of their administrative hearing.  (A driver can choose to have their license suspended earlier.)   Drivers have up to 30 days to request an administrative hearing, but their license will still be suspended after day 45 if they did not request the administrative hearing by day 10.   Rather than facing a suspension,  drivers that refuse to take a breath test can keep their license if they enter into the ignition interlock program.  However, except for a potential exception for work provided vehicles, the driver will only be able to drive vehicles equipped with an ignition interlock system.  (For more information on the ignition interlock system, click here.)

When a driver refuses to take the in-station breath test, an officer should inform the driver that their license will be suspended for refusing to take the test.  The officer should also tell the driver what happens if the driver takes a chemical test and has above a 0.08 or above a 0.15 blood alcohol content.   Prior to suspending a driver’s license, the officer will have the driver sign a DR-15 form.  This form advises drivers of their administrative rights.  The police officer should read the DR-15 to the driver or play a recording of someone reading the DR-15.  An officer’s failure to follow these steps might be considered misleading. 

If a driver can prove in an administrative hearing that the officer gave misleading information or induced the driver into refusing the test, the driver will only be without his or license for a short time – the period between the administrative hearing and going to the Motor Vehicle Administration to get a new driver’s license.  Licenses are confiscated at the administrative hearing, so drivers leave without their license.