Topic: Automobile Lending
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Fannie Mae requires a UCC Financing Statement to be filed on manufactured homes if the state requires it. Does Illinois require a UCC Financing Statement to perfect a lien on a manufactured home, or is a mortgage sufficient? If a UCC Financing Statement is required, should it be filed with the Secretary of State or with the county recorder, and must it be filed within twenty days of the debtor taking possession of the home?
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No, Illinois does not require the filing of a UCC Financing Statement to perfect a lien on a manufactured home. Rather, for a manufactured home that has been deemed to be real property, a lender should perfect its lien by recording a mortgage. For a manufactured home that is personal property, a lender should follow…
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Are we still prohibited from repossessing vehicles from consumer borrowers who are delinquent on their vehicle loan payments? If so, can you direct us to the relevant executive order? Also, are we prohibited from repossessing collateral from delinquent commercial borrows, such as semis and trailers?
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Please note that as of August 23, 2020, the portion of Executive Order 2020-16 referenced in our answer below has been rescinded by Executive Order 2020-48 (“Executive Order 2020-16 is re-issued in its entirety and extended through August 22, 2020, whereafter Section 1 shall be rescinded”). Yes, lenders still are prohibited from repossessing vehicles (including…
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Are voluntary vehicle repossessions prohibited under the Illinois Governor’s Executive Order 2020-16? Also, are we allowed to sell vehicles that already have been repossessed?
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Please note that as of August 23, 2020, the portion of Executive Order 2020-16 referenced in our answer below has been rescinded by Executive Order 2020-48 (“Executive Order 2020-16 is re-issued in its entirety and extended through August 22, 2020, whereafter Section 1 shall be rescinded”). We do not believe that voluntary surrenders of vehicles…
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We are a state-chartered savings bank, and our Guaranteed Asset Protection (GAP) insurance company is running a promotion offering loan officers a $25 gift card for selling GAP insurance on auto loans. Is this legal? Our loan officer will not sell the GAP insurance unless it is required by our banking guidelines.
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Any bank employee who receives any incentive for referring GAP insurance customers would need to obtain an insurance producer’s license from the Illinois Department of Insurance. While the Illinois Insurance Code permits bank employees to enroll consumers in lines of insurance protecting personal property without obtaining an insurance producer’s license, they may do so only…
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Is it permissible to charge off an unsecured loan for a delinquent borrower who is protected by the Servicemembers Civil Relief Act (SCRA)? We also have a delinquent auto loan with the same borrower. What are our collection options?
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Yes, we believe it is permissible to charge off an unsecured debt for a delinquent borrower who is entitled to the protections of the SCRA. Charging off a debt is an internal accounting procedure, and we are not aware of any provisions of the SCRA that would prohibit this. Nor does the SCRA prohibit a…
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We have a customer with loans in collection who is on active duty military service according to the Servicemembers Civil Relief Act (SCRA) website. The customer has an unsecured loan and an auto loan. At the time the loans were made the customer was a sergeant working on an air force base, but she was not on active duty. When the loans came due for collection, we ran an SCRA search and determined that the customer was on active duty status. Were we required by law to cease collection? Can I request the customer’s active duty orders to document her status for our files?
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No, the law does not require that a creditor cease collection efforts when a debtor is on active duty military service if the loan was made before the servicemember went on active duty. However, it may be a prudent business decision for a bank to cease collection efforts when a debtor is on active duty…
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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.
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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…
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Our bank has a customer making payments on a Chapter 13 bankruptcy plan. The bank’s claim is related to an auto loan, and the Chapter 13 trustee has indicated that the secured portion of the claim has been paid in full. The trustee is distributing the customer’s plan payments among the unsecured creditors, and the amount the bank is receiving is insufficient to cover the customer’s monthly loan payment. Can we assess late charges on the loan?
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No, we do not believe your bank can assess late fees, even though such fees may be allowed by the terms of the loan agreement, because your bank’s claim is “undersecured,” meaning the value of the collateral (the vehicle securing the loan) is less than the value of your bank’s claim (the unpaid loan amount).…
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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…