If your car or vehicle was repossessed and you get a deficiency notice from the lender, you can dispute the amount if you disagree with the creditor's calculations.
What Is a Deficiency After Repossession?
After your car is repossessed, the lender usually sells the car. Because car values depreciate rapidly, often the car sales price is lower than the amount you owe on the loan. The lender can also charge you for the costs and fees it incurred in repossessing and selling the car. The deficiency is the difference between the sale proceeds and the amount left on the loan (plus costs and fees).
In most cases, the lender has the right to collect the deficiency from you.
(To learn more, see Deficiency Judgments After Car Repossession.)
Disputing the Amount of the Deficiency
If the creditor sends you a deficiency notice or sues you for a deficiency judgment, you have the right to dispute the amount if the creditor improperly calculated what it claims you owe.
Errors to Look Out For
There are a number of factors to watch for when reviewing the creditor's calculations, including:
- interest rate
- late charges, and
- the amount of the repossession and storage fees.
Compare the these charges against what your loan agreement says is permitted. In addition, the creditor may have also misapplied or failed to give you full credit for all payments you made on the loan.
Check Your State Laws
You might also consider researching your state's laws. Just because the loan agreement allows the creditor to collect various fees and costs doesn't mean your state allows for those fees or costs. For instance, many state laws put a cap on what a creditor can charge for repossession and storage fees. Also, a creditor usually cannot legally charge attorney fees in consumer collection cases. (For help on researching your state laws, see Nolo's Legal Research Center.)
You may have other defenses (even counterclaims) in addition to disputes concerning the deficiency calculation. To learn about those, see Defenses To Car Repo Deficiency Lawsuits.