How to remove a repossession from your Credit Report.
Auto Finance Account Discrepancy: Installment Loan vs. Credit Sale (Factual Dispute)
This strategy to remove a repossession from your credit report takes advantage of a mistake in terminology used to describe the type of auto finance account.
It is important to note that Auto dealerships setup financial accounts in two different ways. First as an “Installment Loan.“ In this arrangement the dealer lends you money directly. After that you pay “installments” until the loan is paid off.
The second way dealers finance customers is through a “Credit Sale” agreement. First the dealer signs you up for the loan and then sells it to a lender.
Usually, dealers prefer “Credit Sale” agreements because they get paid immediately as opposed to collecting interest over a long period of time.
If you signed your finance documents at a car dealership, there is a 90% chance that it was a “Credit Sale” and not an “Installment Loan.” If your credit report refers to your auto finance agreement as a “loan” (and it usually does), you can factually dispute the repossession based on that specific error.
Sample Dispute Letter Text
“Account __________________ (insert account number)is incorrectly identified and reported as an “Installment Loan.” The true account type for this account is a “Credit Sale Agreement.” Please remove this account from my credit file immediately. I have the right to an accurate credit file and discrepancies like this are unacceptable. Please remove this account from my credit file immediately.”
Strategy #2: How to remove a Repossessions from your Credit Report
Late Payments and Payment Amount reported, After Repossession
When your car was repossessed it was more than likely sold at one of the various auto auctions. Usually when a vehicle is sold at auction it sells for less than what is owed which leaves the loan unsatisfied. To clarify an unsatisfied loan is referred to as an auto deficiency. When there is an auto deficiency most creditors continue to report late payments. If they do this the account can be deleted from your credit report. Late payments reported after the car has been repossessed are a legal impossibility. In other words, these late payments are a factual error.
When this occurs, simply dispute the error as you would any other error. Point out the fact that vehicle was repossessed and defaulting on payments at this point is legally impossible.
Sample Dispute Letter Text
Example: “The account you are reporting is identified as a “repossession,” yet you continue to report late payments. Since the vehicle is no longer in my possession, it would be impossible for me to default on payments after the fact. I have the right to an accurate credit file and discrepancies like this are unacceptable. Accordingly, please immediately remove this account in its entirety from my credit file.”
Another potential discrepancy to look for and factually dispute is a “monthly payment amount” appearing after the vehicle has been repossessed. Basically, a monthly payment cannot exist after a repossession has occurred.
Sample Dispute Letter Text
Example: “The account you are reporting is identified as a “repossession,” yet you continue to report an amount for a payment. Since the vehicle is no longer in my possession, it would be impossible for me to have payments after the fact. I have the right to an accurate credit file and discrepancies like this are unacceptable. Accordingly, please immediately remove this account in its entirety from my credit file.”
Unreported GAP Payment
Lastly, this is an advanced strategy that may apply if you purchased GAP insurance on your vehicle. Accordingly if this strategy is followed correctly, with an emphasis on correctly, you can remove your repossession.
Use this method ONLY when your vehicle 1) had GAP insurance at the time of repossession, 2) was sold at auction and 3) there was a balance sold to a 3rd party after auction. To rephrase it ALL three criteria listed above must be met In order for this strategy to work.
Generally dealerships sell GAP insurance as an additional non tangible item that in most circumstances is never needed by the customer. If you have gap insurance for the life of the vehicle, the prorated portion of the vehicle IS covered IF the vehicle is considered a loss. A repossession is considered a loss. In the event of a loss the GAP refund is sent to the FINANCING COMPANY.
In most instances, the FINANCING COMPANY receives the GAP insurance payment long after the account is sold to a 3rd PARTY DEBT COLLECTION AGENCY and the FINANCE COMPANY never updates their books to reflect the true balance of the loan on your credit report. This means that the balance on your report is INACCURATE (FACTUALLY INCORRECT)
3 Steps to using this Strategy to remove a repossession from your credit report
Note: Timing is critical — Complete Step 1 and 2 the same day!
Step 1: First, send a debt validation letter via certified mail, return receipt requested to the 3rd PARTY DEBT COLLECTION AGENCY. Most likely they will respond with the wrong balance, because GAP sent the payment to the FINANCING COMPANY and the FINANCING COMPANY did not report the payment to the 3rd PARTY DEBT COLLECTOR.
Step 2: Next, contact your GAP Insurance Company and request a refund for the loss of the vehicle. They will tell you that the payment has already been made to the FINANCING COMPANY. Have them send you proof of the payment made to the FINANCING COMPANY.
Step 3: Lastly, Send the following items by certified mail, return receipt requested to the 3 credit bureaus
• Dispute Letter. Include the letter explaining why the balance that was reported was inaccurate
• Receipt of Payment. A copy of the receipt of payment from the GAP company to the finance company.
• Debt Verification Letter. A copy of the debt verification letter you sent to the 3rd PARTY COLLECTION AGENCY
• Signed Return Receipt. A copy of the signed return receipt from your debt verification letter
• Response. The response received from 3rd PARTY DEBT COLLECTION AGENCY showing wrong balance
Generally these steps will result in the account in question being deleted from your credit report. If not, file a complaint with the CFPB If the account is not deleted. Finally, resend EVERYTHING you had previously sent along with a COPY of the CFPB complaint to the bureaus and or the 3rd PARTY DEBT COLLECTION AGENCY and demand removal.
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Aaron G. Adams is an Editor and Credit Attorney at AdamsCredit.com