WisBar News: Lender Loses Contract, Consumer Act Dispute over Car Repossession :

State Bar of Wisconsin

Sign In

News & Pubs Search

  • WisBar News

    Lender Loses Contract, Consumer Act Dispute over Car Repossession 

    Joe Forward
    Legal Writer

    Share This:
    A majority (2-1) appeals court panel ruled that a financing contract required a default and a court judgment before the lender could repossess the vehicle. The majority also ruled that the lender violated the Wisconsin Consumer Act when it filed a deficiency action.

    carsFeb. 14, 2013 – A lender that repossessed a consumer’s vehicle without obtaining a replevin judgment breached the financing contract and violated Wisconsin’s Consumer Act, a state appeals court has ruled.

    In 2007, Tommy Kirk financed the purchase of a 1998 Buick Regal, agreeing to pay $305 per month for thirty months. Credit Acceptance Corporation obtained the retail installment contract from the Menomonee Falls car dealership that sold the car.

    Kirk missed his first two payments and defaulted on the loan. Ultimately, Credit Acceptance repossessed the car and sold it at auction for $1,300. ,300.

    Credit Acceptance sought a deficiency judgment for what Kirk owed less the auction sale price. In 2009, the parties agreed to dismiss the case without prejudice.

    Several months later, Kirk filed an action claiming Credit Acceptance breached the contract by repossessing the car without obtaining a replevin judgment.

    The contract stated that if Kirk defaulted and Credit Acceptance received an entry of judgment for the recovery of the vehicle, it could repossess. Kirk may have defaulted, but Credit Acceptance did not obtain a judgment. They needed both, he argued.

    This breach did not allow Credit Acceptance to file a deficiency judgment, Kirk asserted, so Credit Acceptance also violated Wisconsin’s Consumer Act, Wis. Stat. section 427.104(1)(j). That provision prevents consumer debt collectors from attempting to collect a debt “with knowledge or reason to know that the right does not exist.”

    The circuit court ruled in favor of Kirk, awarding $2,300 in damages: $1,000 statutory damages and $1,300 actual damages. Eventually, the circuit court also granted $9,275 in attorney’s fees and costs. Credit Acceptance appealed.

    In Kirk v. Credit Acceptance Corp., 2010AP2573 (Feb. 12, 2013), the District I Wisconsin Court of Appeals affirmed summary judgment in favor of Kirk, concluding that Credit Acceptance breached the contract and violated the consumer act.

    “We conclude the contract language is unambiguous,” Judge Kitty Brennan wrote in a majority (2-1) opinion. “Thus, Credit Acceptance’s repossession of the car without a judgment violates both the contract and the statute.”

    The court also ruled that an arbitration clause within the contract did not require Kirk to arbitrate the consumer act claims, and in any event, Credit Acceptance waived arbitration. “Both Credit Acceptance’s actions and inaction constitute conduct inconsistent with wanting arbitration,” Judge Brennan noted.

    However, the majority reversed the circuit court’s order on damages, concluding that Kirk was not entitled to both statutory and actual damages under section 425.304, which governed damages for Kirk’s consumer act claims.

    That provision allows statutory damages up to $1,000 or actual damages, not both. The court reversed for an order awarding Kirk not more than $1,300 in actual damages.

    The majority rejected Credit Acceptance’s argument that Kirk’s motion for attorney fees and costs was two days late and could not be granted. However, the court ruled that the circuit court erred in granting the attorney fee award without a hearing.

    “Therefore, we remand this case back to the circuit court for a hearing on Kirk’s request for attorney’s fees,” Judge Brennan wrote.


    Judge Ralph Fine wrote a dissenting opinion. He concluded that “Credit Acceptance was entitled to get the car back without first getting a replevin judgment” because Credit Acceptance complied with a 15-day notice to cure under the consumer act.

    Wis. Stat. section 425.205(1g) sets out the notices that must be given before a merchant can repossess a vehicle. Section 425.206(1)(d) states that merchants cannot take possession of collateral subject to a consumer lease without proper notice.

    These provisions did not require Credit Acceptance to obtain a replevin judgment before repossessing Kirk’s car, Judge Fine concluded, despite the language of the contract.

    “Credit Acceptance never got a ‘judgment for the recovery of the Vehicle’ because it did not have to,” Judge Fine wrote. The contract clause did not apply, he argued.

    Judge Fine also concluded that the circuit court erred as a matter of law when it denied Credit Acceptance’s motion to compel arbitration.