Can A Finance Company Disable Your Car

Taking control of your car just because you miss a finance installment? Many people think that such a thing cannot happen, but that’s not necessarily the case. Yes, finance companies do have the legal right to disable cars under certain conditions. Since this is something most people know nothing about, let’s take an in-depth look at this matter.

What are the set conditions under which a finance company is allowed to restrict cars? The main clause that makes this possible is when the contract between the financed and the finance company clearly states that if the financier misses a payment deadline, the latter retains the right to repossess the automobile. One must also mention that according to the law, the financier is not allowed to touch the vehicle until the payments are at least two weeks overdue. Also, finance companies have the right to simply wait and see if the financier catches up on their payments and sometimes this is enough.

Now, let’s dive into the particulars of the disabling process. Finance companies cannot disable cars on their own, they have to hire technicians that are allowed to use certain devices. There are three ways to disable cars – immobilization, wheel clamps and relay boxes. Immobilization is the most common method and it is done by fitting a device to the car’s electronic system. Wheel Clamps are usually used as a means to threat because immobilizing them can be overly expensive. Lastly, the relay box is a device that needs to be installed in the car’s wiring system. This somehow cuts off the flow of power from the battery, causing the car not to start.

It’s also important to note that all of these methods are a lot less intrusive then involuntary repossession. These methods create a real possibility of voluntarily giving the car back to the lender and resolving the money dispute without any damage to the car’s components.

It also needs to be said that finance companies are obligated to warn the financed party before attempting any action. This generally comes in the form of a letter or a telephone call. If the financiers don’t respond, the lender is allowed to move in and disable the car.

Obviously, even if all of the conditions have been fulfilled, it is still illegal to move in and simply take the car away, so finance companies are obligated to act within the framework of the law. The technique of simply disabling cars allows the financiers to still keep the car, but with limited use. Also, because this is a much less invasive practice, it allows the financed to pay lenders in other ways and still keep their car – for instance, by continuing the payments with a new installment plan, for example.

Is There A Risk Of Accidental Damage?

Apart from the legal side of things, one needs to take a look at the practical side of disabling cars and the risk of accidental damage. According to experts, the risk of a technician causing any physical damage to the car when installing the devices is very small. Most cars today are outfitted with modern computer systems and technicians who are certified to work with them are experienced enough not to cause irreversible damages.

The same experts also note that accidental damages are often already present when someone attempts to disable them. In these cases, the lender is obligated to fix the damage, even if it wasn’t caused by their technician. After all, legally speaking, the cars still belong to the financier until they give them away.

What Is The Place Of Insurance Companies?

It is also important to point out that insurance companies have their role in preventing finance company’s abuse of the disabling system. Insurance companies can refuse to cover anything that results from this kind of abuse, which means that lenders are losing their own collateral if anything goes wrong and they are unable to collect the debt.

Not to mention that even if lenders manage to disable the car, they still need to worry about something else – informing the state’s DMV of the car ownership statues. If this isn’t done properly, the financier might actually be able to register the car under a new owner and sell it away from the lender’s hands. This is why many states deprive the financier of their registration privileges until the debt is cleared.

How To Avoid Lenders?

Now, let’s talk about the subject everyone wants to know – how do we avoid lenders in the first place? It goes without saying that the best ways to do so is by staying current with payments. But that’s not enough, financiers also need to read through the payment terms of the contract they’re signing in order to get a good understanding of what they have committed to.

It’s also important to search for a lender that will match the financiers needs and habits. If a financier is prone to missing payments from time to time, make sure to state this to the lender and find one that will be accommodating for this. Lastly, if financiers think that the lender is being overly aggressive – the legal right to disable cars only applies to certain conditions, so make sure to ask around and look for discussion online.

What If The Lender Repossesses The Car?

If, however, the finance company decided to repossess the car instead of disabling it, the financier has little legal option to push against this. Contrary to what many people think, finance companies don’t need a court order to repossess a car. The lenders are only obligated to send out at least one warning letter, which means that lending companies can act unilaterally.

This is why it is extremely important for the financiers to know the law since the lender’s decision cannot be questioned. If, however, the lender failed to “store” the borrower’s personal items, they should receive compensation for the repossession.

What Are Some Lender Abuse Prevention Strategies?

As far as prevention of lender abuse goes, apart from making sure to read through all of the payment agreements, financiers also need to look out for potential abuses. This can be done by checking the lender’s previous moves on other people or paying close attention to the behavior of the lenders. If someone notices any signs of potential abuse – by citing the law or questioning their decision – the lender should toe the line.

It is also important for financiers to know their rights when it comes to repossession – knowing the law is extremely important for this. First of all, lenders are obligated to return the car if it can be proven that the debt has been paid in full. Secondly, if the lender fails to “store” the borrower’s personal items, meaningful compensation should be made. Lastly, lenders are legally obligated to return the vehicle in the same condition it was before the repossession, so all damages should be compensated.

What About the Bankruptcy Option?

Finally, if all else fails, financiers can resort to bankruptcy. This option is available in some states and it is designed to create a “pause” in the payment terms. This gives financiers time to restructure the payment plan and catch up on the loans. After this, it is up to the state’s laws to decide which assets can be taken for debt clearance.

Bankruptcy does come with some legal issues and it is advised to get a professional attorney to help with the procedure. Some states consider cars as “non-exempt assets”, which means that the Court can decide to take away the car in order to resolve the dispute.

What Can We Conclude?

At the end of the day, everyone should know that finance companies are legally allowed to disable cars if the right conditions are present. And while this is something that nobody wants to go through, understanding of the law can help financiers prevent this form of lender abuse. Also, staying up to date with payments and not letting things spiral out of control can go a long way in avoiding lenders while also keeping a loan agreement in good terms.

Marjorie Turcios is a seasoned leader and management expert with over 25 years of experience. She has held various leadership positions in private industry, government, and education. She is an advocate for creating win-win solutions and has worked to create successful, lasting change in corporations and organizations. Marjorie is an award-winning author of several books on leadership, mentoring and coaching, and effective communication skills. Her passion is to help others discover their potential and reach new heights in their professional life through her writings. Marjorie resides in Dallas, Texas where she enjoys spending time with her family, traveling to different places around the world, and speaking at conferences about her areas of expertise.

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