Repossession Risks

Repossession Risks

Issue #11, October 2013

Interlocks and impounds: understanding the risks

Suppose a finance or lease customer calls and advises you that his car has been impounded by police in New York as the result of a charge of Driving While Under the Influence (DUI). The customer states that he can get the car back if you allow him to install an interlock on the car. Should you go along and allow the interlock?

An interlock ignition device “interlock” is a mechanism that prevents a vehicle from being started without first determining from a breath sample that the driver’s blood alcohol level does not exceed the lawful limit.

Interlocks are frequently required as a part of a plea bargain that allows a DUI offender to continue to drive for necessary purposes.

Theoretically, interlock devices are supposed to prevent operation of a vehicle while under the influence. However, one can readily find numerous ways to bypass these devices. Just Google “How to bypass an interlock device”.

Is there any risk of the finance company being sued for bodily injury if the interlock is bypassed and someone is injured in a DUI incident?

The risk comes from a theory called “negligent entrustment”. Under this theory, a vehicle finance company can be held liable if the finance company allowed use of the vehicle and had “special knowledge” concerning a characteristic peculiar to the driver, which rendered the driver’s use of the vehicle unreasonably dangerous. [See: Burrell v Barreiro, 83 AD3d 984, (2011)]

Generally, a finance company has no way to know that financing a vehicle could put a dangerous person on the road. But would a finance company’s knowledge that a customer has installed an interlock constitute “special knowledge” that the driver is a potential danger to the public? If the answer is “yes”, then the finance company can be held liable for damage caused in a future accident or DUI offense — that includes bodily injuries.

A company that permits a customer to operate a vehicle with an interlock enables the customer to stay on the road. The interlock device itself is a “red flag” to any personal injury lawyer. When this device is seen in a car that caused harm, the personal injury lawyer will know for a fact that the driver had a prior DUI history.

The argument that leasing companies are immune from liability under the Graves Amendment, 48 USC 30106, overlooks the fact that the Graves Amendment does not protect leasing companies that are negligent in allowing a driver to use a vehicle. Thus, the negligent entrustment theory can be used to get around the Graves Amendment protection of lessors.

How much time must be given to redeem after repossession?

There is a common notion that a consumer must be given at least ten days to in which to redeem a vehicle after repossession. The Uniform Commercial Code (UCC) does not provide a set number of days for consumer cases. In order to answer the question it is helpful to review several UCC sections.

UCC 9-623 provides that the right to redeem exists until the car is sold. Because the right to redeem is tied to the sale, redemption is considered part of the sale process.

UCC 9-611 states that the notice of the sale must be sent within a reasonable time before the sale. UCC 9-610 states that all aspects of the sale process must be performed in a reasonable manner.

For commercial cases, UCC 9-612 provides that ten days is reasonable.

For consumer cases, the UCC does not state what amount of time is reasonable. However, the implication is that a period less than ten days may not be reasonable because consumers are given more protection than commercial debtors. But, the bottom line is that the UCC does not give any specific number of days for consumer cases. The creditor bears the burden of figuring out what is reasonable under the circumstances.