How Much Are Repossession Fees in NC?

When a borrower defaults on a loan secured by personal property, such as a vehicle, the lender has the right to repossess that collateral. In North Carolina, this process involves various costs the borrower may ultimately be responsible for. State law provides a framework for what fees lenders can charge and how those charges are handled. Understanding these regulations is important for individuals facing repossession.

Allowable Repossession Fees

Following a repossession in North Carolina, lenders can impose several types of fees on the borrower, provided these expenses are actual and reasonable. These charges include direct costs for physical recovery of the collateral. Expenses for towing the repossessed property to a storage facility are included. Storage fees, covering the duration the property is held before disposition, also apply.

Allowable expenses also relate to preparing the property for resale and the sale itself. This can include costs for minor repairs, cleaning, or detailing to enhance the property’s market value. Other charges cover administrative tasks, such as processing paperwork or notifying the borrower. Reasonable attorney’s fees and legal expenses incurred during the repossession and disposition process may be added to the borrower’s debt, as outlined in North Carolina General Statute 25-9-615.

North Carolina Fee Limitations

North Carolina law places conditions on the fees lenders can charge after a repossession. Lenders are limited to recovering “reasonable expenses of retaking, holding, preparing for disposition, processing, and disposing,” along with reasonable attorney’s fees and legal expenses. While there are no specific statutory dollar limits on repossession fees, the requirement for these costs to be “reasonable” prevents excessive charges.

Borrowers have a right to receive an itemized statement of account upon request. This statement must detail charges for repossession expenses, storage, and legal fees. Before selling repossessed property, the creditor must provide the borrower with specific notices. These include the date, time, and place of a public sale, or the date after which a private sale will occur. These notices inform the borrower about the disposition process.

Payment Responsibilities

The borrower is responsible for paying repossession fees, which are added to the outstanding loan balance. These fees become part of the total amount owed, either to redeem the property or as part of any deficiency balance after the property is sold. If the borrower wishes to reclaim their repossessed property, they must tender the full amount of the obligation secured by the collateral, along with all reasonable expenses and attorney’s fees incurred by the lender.

If the repossessed property is sold, the proceeds are first applied to cover repossession costs, then to the remaining loan balance. If the sale price is insufficient to cover the outstanding loan balance and all associated repossession fees, the borrower remains liable for the difference, known as a “deficiency balance.” Lenders can pursue collection of this deficiency, potentially through legal action to obtain a deficiency judgment. Voluntarily surrendering the collateral to the lender can help mitigate certain repossession fees, such as towing costs, by preventing the need for a third-party repossession agent.