You carefully review your indirect finance agreements, you start doing business with a finance source, and in a few months you get a demand to repurchase the contract. Do you just pay the demand, or do you engage the creditor?
Remember, a demand for repurchase is based on the finance company’s interpretation of the indirect finance agreement. Carefully review the demand for repurchase and the facts of the deal to determine your rights. If you do not believe that the demand for purchase of the paper is appropriate, challenge it.
In difficult financial times, finance sources are especially aggressive in their position concerning the compliance by dealers with the indirect finance agreement. Here are some common issues that finance companies raise.
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The deal contains a promissory note or a hold check for the down payment. What does the indirect finance agreement say? A hold check or a promissory note should not be a problem if the instrument was collected before you assigned the retail installment sale contract to the finance company.
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The customer does not have insurance. What does the agreement say? If you were careful in negotiating the agreement provision on insurance, the dealer should only have been required to verify insurance at the time the retail installment sale contract was done.
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The debtor’s signature or the cosigner’s signature on the RISC was forged. A finance company may even have an affidavit of forgery. Don’t blindly accept that. Customers unhappy with their obligations, especially cosigners, will often complain that they never signed the RISC. Check the details of the transaction carefully. If you believe you can prove that the RISC was appropriately signed, challenge the finance company as well as the customer claiming a forgery.
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The customer went bankrupt and the lien was not perfected in time. Under federal bankruptcy law, a dealer has 30 days from the time the customer takes possession of the vehicle to perfect the lien and protect the creditor’s security in the event the customer declares bankruptcy. Under many state laws, perfection is achieved when the paperwork is processed or filed, not when DMV finally notes the lien. Carefully check the claim of the finance company. If the vehicle was delivered after the papers were signed, it is the delivery date that controls. If you are in a state which deems a lien perfected when the paperwork is filed or processed and you filed the papers in time, you may have complied with your obligation.