• New York state law requires that creditors "perfect" their car lien.new york image by Gerhard F??hring from Fotolia.com
  
  Unless the buyer pays cash for a car, then the law refers to the sale as a “secured transaction.” In New York State, the legislature has adopted the Uniform Commercial Code to govern sales and secured transactions. Car sales are considered “secure” because the car itself acts as collateral for a loan in which a creditor gives the buyer money to pay for the car. Typically, a creditor only agrees to lend money to a creditworthy consumer to purchase a car who agrees to allow the creditor to retain a security interest in the car. That security interest allows a creditor to repossess the car without getting a court order in the event the buyer stops making payments on the loan.
  
  

Perfection

• To retain a security interest in the car, the creditor must “perfect” its interest. If the creditor has not perfected its security interest in the car, then it cannot lawfully repossess the car without obtaining a court order. To perfect its interest under New York State law, the creditor must have its interest (or lien) stated on the certificate of title including its name and address. In addition, the creditor must pay a $5 lien recording fee to the New York Department of Motor Vehicles (NYDMV). New York State law prohibits creditors from passing this fee on to the buyer or seller.
  
  

Repossession

• As part of a sales contract, the buyer agrees to make monthly payments to the creditor. These payments include money toward both the principal of the loan and the interest at which the creditor charges the buyer. If the buyer stops making payments, then the buyer is in default and has breached the sales contract. Breaching the sales contract triggers the creditor’s right to repossess the car. Under New York State law for car repossession, in this situation, the creditor can simply send a tow truck to seize the car. However, the creditor can only take this action if it can do so without “breaching the peace.” Using force, the threat of force or violating New York trespass laws constitutes breaching the peace. If the tow truck driver does any of those things, then the repossession is not lawful.
  
  

Resale

• After repossessing, the creditor must provide the buyer with personal notice that it has repossessed the car within 24 hours of repossession. If the creditor cannot personally reach the buyer, the creditor must send first-class, special delivery mail stating the action it has taken. Once the creditor has possession of the car, the creditor may sell the car at either a private or public auction. The creditor must also provide notice to the buyer that it intends to sell the vehicle at auction. The sale, under New York State law, must be done in a “commercially reasonable” manner. In other words, the creditor cannot sell a $40,000 vehicle for $4,000. However, if the sale is reasonable and the creditor does not recover the unpaid balance of the loan plus reasonable costs, expenses and attorneys’ fees related to the repossession, then the creditor can go after the repossessed buyer for that money.