IBA Compliance Connection

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What, if any, Illinois laws would apply to the bank selling repossessed property — particularly vehicles? Additionally, would you recommend that we have some sort of agreement that indicates the vehicle is being sold as-is without any warranty?

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The Illinois Uniform Commercial Code (UCC) governs most aspects of a sale of repossessed loan collateral. For sales of repossessed automobiles, certain provisions in the Illinois Vehicle Code and Secretary of State’s administrative rules also would apply if your bank does not have an assignment of the vehicle’s title by the owner.

A sampling of potentially relevant provisions from those laws are linked to in our resources below, but we cannot guarantee that this list is complete. We strongly recommend consulting with bank counsel when selling repossessed loan collateral — a debtor may sue your bank for a failure to comply with the UCC’s requirements, such as providing proper notice to the debtor and conducting a commercially reasonable sale of the collateral.

We are not aware of any Illinois law or rule that would prohibit your bank from selling a vehicle “as-is” and without warranties, and the UCC does permit secured parties to dispose of collateral “in its present condition.”

For resources related to our guidance, please see:

  • UCC, 810 ILCS 5/9-610(a) (“After default, a secured party may sell, lease, license, or otherwise dispose of any or all of the collateral in its present condition or following any commercially reasonable preparation or processing.)
  • UCC, 810 ILCS 5/9-610(b) (“Every aspect of a disposition of collateral, including the method, manner, time, place, and other terms, must be commercially reasonable. . . .)
  • UCC, 810 ILCS 5/9-612 (Timeliness of notification before disposition of collateral.)
  • UCC, 810 ILCS 5/9-613 (Contents and form of notification before disposition of collateral.)
  • UCC, 810 ILCS 5/9-615 (Application of proceeds of disposition; liability for deficiency and right to surplus.)
  • UCC, 810 ILCS 5/9-625 (Remedies for secured party’s failure to comply with Article.)
  • Illinois Vehicle Code, 625 ILCS 5/3-114(f) (Notice and reinstatement requirements imposed on repossessing lienholders.)
  • Illinois Secretary of State Administrative Rules, 92 Ill. Adm. Code 1010.160 (Repossession of vehicles by lienholders and creditors.)