Car repossessed on the unpaid loan from the previous owner
A man whose car was repossessed just months after he bought it because of the outstanding debt of the previous owner is cited as a good example of why buyers should be careful.
The man bought the car from a private seller for $ 6,000.
But he found out that the seller had stopped paying the loan and the lender had the legal right to repossess the car from him, only when the repossession agent showed up two months later.
The man called the lender to try and negotiate the recovery of his car but was told this could not be discussed as he was not the borrower of the loan. The seller had moved to another country.
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The buyer recently complained to Financial Services Complaints Ltd (FSCL), an external dispute resolution mechanism.
FSCL does not identify complainants or the companies they complain about.
He said in a case note that the man felt it was unfair that he was left without a car he had paid for.
“[He] did not hear anything from the lender until the repossession agent was at their door. He felt that the lender should have sued the seller for the balance of the loan, rather than taking away the car he had paid for.
“The lender said they were following their standard process. They had not received any payments or contact from the borrower, so they were entitled to recover the car, which was the registered collateral for the loan.
He was told that the lender would talk to him about paying a lump sum to release his collateral on the car or transfer the loan to his name, but the seller would have to authorize it.
“As the seller could not be contacted, this was not an option. In any case, [the buyer] felt that this would not resolve his complaint, as he should not have to pay the seller’s debt when he had already paid the seller $ 6,000 when he bought the car.
The FSCL said it could not investigate either, as it could only review cases where a person had received a service from a supplier they complained about.
“Even if [he] was unaware of the loan when he bought the car, we explained that the seller had previously given the car as collateral for a loan. The lender had then registered its interest in it in the Personal Property Security Register (PPSR). If the borrower, the seller of the car, did not repay the loan, the lender was entitled to repossess the car to pay off the debt owed.
“We explained… that the lender did nothing wrong by repossessing the car because he was entitled to the car and to the debt collection. Since the lender was subject to privacy laws, they couldn’t disclose … any information about the loan because that information was about the seller.
FSCL said the buyer should have checked the PPSR before purchasing the vehicle and insisted the loan was cleared before purchasing it. “You can go to the PPSR to see if there are any debts or obligations related to the goods you want to buy and to make sure that someone else doesn’t have a superior legal right to the goods.
“If someone sold you a vehicle with a registered security interest attached to it, you might want to contact the private seller about paying off their debt. If the seller does not refund the money, you can seek legal advice, perhaps from a community legal center, and take the case to Dispute Court.
Chris Walsh, founder of financial research site MoneyHub, said it was risky to buy a car without this basic check.
“Anyone can sell you a car, but debt can be owed. The law favors the lender, otherwise anyone could resell a financed car, pocket the money, and repeat the trick over and over again.
“Nonetheless, people continue to get caught, hence the popularity of services like CarJam. Consulting the PPSR directly or using a service such as CarJam is an essential step when buying a used car. If you don’t and a lender shows up at your doorstep, your rights are less than theirs. For greater certainty and clarity, it is essential to do all the checks.