AARP Asks Court to Uphold Rights Under California's Consumer Protection Law

AARP's brief urges a California state appeals court to uphold state consumer protection laws against a national bank repossessing property.

Background

Jesus De la Cruz and Willie Mae Jackson obtained a car loan from a dealership. The installment loan was sold to Wachovia, which repossessed the automobile after the borrowers fell behind on payments. Wachovia did not follow the proper procedures detailed in California law in repossessing the vehicle, maintaining that since it was a national bank it did not have to follow state repossession laws. California's repossession laws are intended to balance the rights of buyers and sellers, lenders and borrowers. When challenged by De la Cruz and Jackson, Wachovia claimed it was exempt from state repossession laws because it is a nationally chartered (and not a state chartered) bank. Therefore, the bank claimed, it does not need to follow state repossession law but instead adhere solely to federal laws and rules.

AARP Foundation Litigation attorneys, along with the Center for Responsible Lending, filed AARP's "friend of the court" brief arguing that national banks are compelled to follow the same laws California has established for other creditors when seeking to repossess assets. The brief points out that no federal law authorizes a bank to take a borrower's personal property without following judicial process, which by definition means following state repossession laws, and that this requirement was recently upheld by a federal appellate court.

The brief also points out that California's repossession law is carefully crafted and has been in place for more than 70 years. The law contains protections for both borrowers and lenders, provides lenders relief they might not otherwise be entitled to, and thus is a conscious effort to balance rights in a way that is fair for everyone.

What's at Stake

Property owners are entitled to proper notice and process when their property is repossessed. Moreover, state laws protect both owners' rights prior to repossession and their rights to cure defaults post-repossession. These carefully crafted state laws should not simply be run roughshod over by national banks that do business in the state. The implications for national banks ignoring state laws go far beyond repossession of automobiles — an adverse decision could erode state foreclosure protections, for instance, and affect the rights of homeowners.

Case Status

De la Cruz v. Wachovia is pending before the Court of Appeal for the State of California, Fourth Appellate District.