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1.4.13 Repossession of Leased Property

In general, UCC Article 2A rather than Article 9 applies to most closed-end automobile leases, the type of lease that is commonly used today. Many provisions of Article 2A, such as the prohibition of breach of the peace during repossession, are comparable to Article 9, but there are significant differences. Because the lessor already owns the automobile, sale of the vehicle is not used to reduce a credit obligation, but to help compute an early termination charge. The federal Consumer Leasing Act affords additional protections and remedies to consumer lessees, as do state consumer leasing statutes and state credit codes in some states.

  • • Did the consumer default? See § 14.2.2, infra.
  • • Does state law require the lessor to afford the consumer a right to cure the default prior to repossession? See § 14.2.3, infra.
  • • Did the repossession breach the peace? See § 14.2.4, infra.
  • • At the time the consumer entered into the lease, did the lessor clearly and conspicuously disclose what the consumer’s liability would be upon early termination? Is the formula for calculating the consumer’s early termination liability unreasonable? Is the creditor violating its own formula? See §§ 14.2.6 to 14.2.9, infra.

Rent-to-own (RTO) transactions must be analyzed differently, because there is no further consumer obligation when the rental is terminated early (other than liability for past due charges). Most states have passed special RTO laws, some of which state that Article 9 or state credit statutes do not apply to RTO transactions. The federal Consumer Leasing Act does not apply to most RTO transactions.

  • • Does a state RTO statute preclude the application of Article 9 or a state credit statute to the transaction? If Article 9 or a state credit statute applies, the RTO company is probably operating in violation of it. See §§ 14.3.2, 14.3.3, infra.
  • • If a state RTO statute applies, did the creditor violate it? See § 14.3.6, infra.
  • • Did the creditor breach the peace while repossessing the goods? As most RTO transactions involve household goods, trespass into the home during repossession is common. See §§ 6.4, 14.3.6, infra.
  • • Even if the transaction does not violate state credit laws, is it unconscionable? Did the creditor commit unfair or deceptive acts or practices during the course of the transaction? See §§ 13.4,, infra.
  • • Has the consumer been wrongfully prosecuted or threatened with prosecution for rental theft? See § 14.3.9, infra.