Banking Interpretations

February 21, 2002

Mr. James R. Smith
Advanced Remarketing Systems
1 Dewline Road
Liverpool, NY 13090

Re:  Purchase of repossessed vehicles

Dear Mr. Smith:

Your February 4, 2002 letter regarding whether current methods used by lenders for disposing of repossessed vehicles violate the rights of the consumer has been referred to me for response.

You state that your research of the New York General Obligations Law ("GOL") and the New York Uniform Commercial Code ("UCC") indicates that a consumer has the right to attend and bring bidders to an auction of his repossessed vehicle.  However, you contend that the current industry practice used by lenders to dispose of repossessed vehicles is through private auctions that prohibit the attendance of the consumer as well as any other potential bidders that the consumer may wish to attend.  Although not stated directly in your letter, I believe your inquiry is whether this practice is permissible under New York law.

In New York, the repossession and disposition of a motor vehicle is subject to the provisions of Article IX of the UCC.  Specifically, UCC §9-504(3) states that repossessed collateral may be disposed of by public or private proceedings.  Therefore, the UCC does not prohibit a lender from disposing of the repossessed vehicle through a private auction and does not provide the consumer with the right to attend and bring potential bidders to said auction.  I would add that Section 316 of the Personal Property Law ("PPL") provides that upon payment of the amounts due and owing under the sales contract, the consumer may redeem the repossessed vehicle prior to auction.

Please be advised that my review did not find any provisions of the GOL applicable to the repossession and subsequent disposition of a motor vehicle.

Finally, I note that the Banking Department has no particular expertise or jurisdiction to interpret the GOL, PPL or the UCC and, therefore, the opinions contained herein are to be considered informal.

Very truly yours,

Alvin A. Narin
Assistant Counsel