Can They Still Repossess Your Car While You're Fighting the Lender in Arbitration?

The short answer: potentially, yes.

Filing an arbitration against your auto lender generally does not automatically stop the lender from repossessing your vehicle if the lender claims you are in default.

That distinction is important. Arbitration gives you a forum to challenge the lender's conduct and pursue legal remedies, but simply filing an arbitration is not the same thing as obtaining an order prohibiting repossession.

"But I'm Disputing What I Owe"

This is where consumers can understandably become frustrated.

You may believe the lender:

• misapplied your payments;
• charged improper fees;
• failed to credit payments correctly;
• mishandled an extension or deferment;
• incorrectly calculated the amount necessary to bring the account current;
• violated your rights during an earlier repossession; or
• otherwise breached your contract or applicable law.

You may even have an arbitration pending over those exact issues.

But a pending dispute does not necessarily prevent the lender from exercising its claimed rights under the finance contract while the dispute is being decided. In many states, a secured auto lender can repossess a vehicle after default without first filing a lawsuit or obtaining a court judgment, although the specific requirements and consumer protections vary by state.

Does Filing Arbitration Create an Automatic "Stay"?

Generally, no.

Consumers sometimes assume that filing arbitration works like filing bankruptcy. It doesn't.

A bankruptcy filing can trigger an automatic stay under federal bankruptcy law that generally stops many collection activities. Filing a consumer arbitration does not ordinarily create that type of automatic statutory stay.

So consumers should not assume that a pending arbitration, by itself, prevents repossession.

Can an Arbitrator Stop a Repossession?

Potentially.

Depending on the arbitration agreement, the applicable arbitration rules, the facts of the case, and governing law, a consumer may be able to request interim or injunctive relief while the arbitration is pending.

For example, the American Arbitration Association's Consumer Arbitration Rules authorize an arbitrator to grant certain interim measures, including injunctive relief and measures concerning the protection of property.

That does not mean an arbitrator will automatically stop a repossession. The consumer has to seek appropriate relief and establish a legal basis for receiving it.

Depending on the contract and circumstances, court relief may also be available even though the underlying dispute is being arbitrated.

Don't Wait Until the Tow Truck Arrives

Timing can matter.

If your vehicle has not yet been repossessed but you believe repossession is imminent, waiting for the final arbitration hearing may be risky. A consumer who needs immediate relief should determine promptly whether interim relief is available and what procedures must be followed to request it.

If the vehicle has already been repossessed, there may be additional deadlines concerning notices, reinstatement or redemption rights, disposition or sale of the vehicle, and personal property left inside the vehicle. Those rights vary significantly by state.

What If the Lender Repossesses the Car During Arbitration?

Repossession does not necessarily make the arbitration disappear.

Depending on the facts and applicable law, the repossession itself—or what happens before and after it—could become relevant to the consumer's existing claims or potentially give rise to additional issues.

For example, questions may arise concerning:

• whether the consumer was actually in default;
• whether required notices were provided;
• whether the repossession was conducted lawfully;
• whether payments or extensions were properly credited;
• fees assessed in connection with the repossession;
• handling of personal property;
• reinstatement or redemption rights; and
• what happened to the vehicle after repossession.

The answers depend heavily on the contract and the law of the consumer's state.

If You're Already in Arbitration, Don't Assume Your Car Is Protected

The key takeaway is simple:

If keeping possession of the vehicle is important, the question isn't merely whether you have filed arbitration. The more important question may be whether there is a legal basis and procedural mechanism for obtaining temporary or interim relief while the underlying dispute is pending.

Consumers facing an imminent repossession should consider obtaining legal advice promptly rather than assuming the arbitration itself protects the vehicle.

Questions About an Auto Finance Dispute?

Pride Law Office represents consumers in disputes involving auto finance companies, including matters that may be subject to arbitration.

If you are involved in a dispute with an auto lender or finance company and are concerned about repossession while the dispute is pending, contact Pride Law Office to discuss whether your situation may warrant further review.