We had a customer relinquish a vehicle, so we did not repossess it. Do we need to send a 21-day redemption letter advising the customer of our intent to sell the vehicle if it is not redeemed? We have a potential buyer who would like to purchase the vehicle.

It depends. If the customer signed an assignment of the certificate of title for the vehicle when they relinquished the vehicle to the bank, it is not necessary to send the customer a 21-day notice of redemption, and assuming your bank has a security agreement providing for the right of resale, the bank may proceed with a sale of the vehicle under the Uniform Commercial Code.

However, if the customer relinquished the vehicle without assigning the certificate of title to the bank, then you must send a notice of redemption to the customer’s last known address, advising the customer of the bank’s intent to sell the vehicle 21 days after the date of the notice if the vehicle is not redeemed. This notice also must provide the customer with contact information for the employee or agent of the bank who will advise the customer of the amount necessary to redeem the vehicle.

In the latter case (where no certificate of title has been assigned), if the customer used the vehicle primarily for personal, family, or household purposes, your bank also is required to send the customer an affidavit of defense to be completed by the customer.

For resources related to our guidance, please see:

Illinois Vehicle Code, 625 ILCS 5/3-114(f) (“Repossession with assignment of title. In all cases wherein a lienholder has repossessed a vehicle by other than judicial process and holds it for resale under a security agreement, and the owner of record has executed an assignment of the existing certificate of title after default, the lienholder may proceed to sell or otherwise dispose of the vehicle as authorized under the Uniform Commercial Code.”)

Illinois Vehicle Code, 625 ILCS 5/3-114(f-5)(1) (“Repossession without assignment of title. Subject to subsection (f-30), in all cases wherein a lienholder has repossessed a vehicle by other than judicial process and holds it for resale under a security agreement, and the owner of record has not executed an assignment of the existing certificate of title, the lienholder shall comply with the following provisions: (1) Prior to sale, the lienholder shall deliver or mail to the owner at the owner's last known address and to any other lienholder of record, a notice of redemption setting forth the following information: (i) the name of the owner of record and in bold type at or near the top of the notice a statement that the owner's vehicle was repossessed on a specified date for failure to make payments on the loan (or other reason), (ii) a description of the vehicle subject to the lien sufficient to identify it, (iii) the right of the owner to redeem the vehicle, (iv) the lienholder's intent to sell or otherwise dispose of the vehicle after the expiration of 21 days from the date of mailing or delivery of the notice, and (v) the name, address, and telephone number of the lienholder from whom information may be obtained concerning the amount due to redeem the vehicle and from whom the vehicle may be redeemed under Section 9-623 of the Uniform Commercial Code.”)

Illinois Vehicle Code, 625 ILCS 5/3-114(f-5)(2) (“With respect to the repossession of a vehicle used primarily for personal, family, or household purposes, the lienholder shall also deliver or mail to the owner at the owner's last known address an affidavit of defense. The affidavit of defense shall accompany the notice of redemption required in subdivision (f-5)(1) of this Section. The affidavit of defense shall (i) identify the lienholder, owner, and the vehicle; (ii) provide space for the owner to state the defense claimed by the owner; and (iii) include an acknowledgment by the owner that the owner may be liable to the lienholder for fees, charges, and costs incurred by the lienholder in establishing the insufficiency or invalidity of the owner’s defense. To stop the transfer of title, the affidavit of defense must be received by the lienholder no later than 21 days after the date of mailing or delivery of the notice required in subdivision (f-5)(1) of this Section. If the lienholder receives the affidavit from the owner in a timely manner, the lienholder must apply to a court of competent jurisdiction to determine if the lienholder is entitled to possession of the vehicle.”)

Illinois Secretary of State Administrative Rules, 92 Ill. Adm. Code 1010.160 (Repossession of vehicles by lienholders and creditors.)