Hoosier Banker 29 Brett J. Ashton Partner Krieg DeVault LLP BAshton@KDLegal.com Krieg DeVault LLP is a Diamond Associate Member of the Indiana Bankers Association. While many banks outsource their aged collections activities to outside counsel, oftentimes certain required notices under the Indiana Uniform Commercial Credit Code (Ind. Code § 26-1-1 et. seq.) are provided by bank collections staff. While these collections letters are generally created from a template document based on the particular circumstance of the delinquency and/or default, recently the content of these template documents has become the target of class action litigation by plaintiffs’ lawyers seeking to turn what started as a typical collections lawsuit into a class action claim for violations of the IUCC. Litigation in this area has been based predominantly on alleged failures to send pre-sale and postsale notices in connection with defaulted auto loans that comply with the IUCC. Specifically, Ind. Code § 26-1-9.1-611(b) requires a secured creditor before dispossession of a consumer’s repossessed collateral, to send the consumer (debtor) a “reasonable authenticated officiation of disposition,” which provides the consumer (debtor) with specific information about the intended disposition and the consumer’s (debtor’s) redemption rights. Ind. Code §§ 26-1-9.1-613 and 26-1-9.1-614 of the IUCC set forth the mandatory information that the secured party must include in the written notice of intended sale of the collateral (the “presale notice”). Ind. Code § 26-1-9.1-616 requires that the secured party mail consumers (debtors) an “explanation” of surplus or deficiency after it sells the debtors’ vehicles (a “post-sale notice”). This statute also requires that the post-sale include specific information and the order in which the information must be presented. See IC 26-1The information herein is provided for general education purposes and is not intended to be legal advice. Please consult legal counsel for specific guidance as to how this information applies to your institution’s circumstances or situation. *See Financial Center First Credit Union v. Rivera, 178 N.E. 3d. 1245 (Ind. App. 2021) Avoid Collections Blowback 9.1-616(c). The pre-sale and post-sale notice provisions of the IUCC set out specific information that must be disclosed to the consumer (debtor). Part of Ind. Code §§ 26-1-9.1-613 and 26-1-9.1-614 contain an actual form disclosure to satisfy the IUCC in this regard. If your current pre-sale or post-sale notice do not follow the text of the model disclosure in the IUCC, you should amend it to reflect the language (and requirements) of the code. Some institutions have seen litigation for even minor deviations from the statutory template, or failing to include one or more pieces of information required by the code. Litigation on these issues generally arises in the form of a counterclaim against the bank in response to an existing collections lawsuit. Often, plaintiffs’ counsel will assert that even if the underlying loan agreement and deposit account agreement contains an arbitration clause, that the bank has waived its right to move any counterclaim to arbitration by virtue of its filing the collections action in court. While in some cases courts have precluded a lender from enforcing arbitration and class action waiver provisions in their agreements in this scenario,* a carefully worded arbitration clause and filing motion to enforce arbitration in a timely manner can still ensure any substantive claims beyond the underlying collections matter can be resolved in arbitration. HB COMPLIANCE CONNECTION
RkJQdWJsaXNoZXIy MTg3NDExNQ==