This is one of the main areas of questions that we get asked and I think that issue arises because there are different rules for different provinces. So when someone gets a car loan in Ontario, then the debt and the lender are both governed by Ontario laws. But what happens when the debtor relocates to another province such as BC. ? Often if a debtor relocates the creditor may try to collect the debt based on the province where the original loan was granted, which is incorrect. The collection practices and policies are based on where the debtor is living and where the car is registered – now where the lender is located. Lenders should inform debtors of their rights, but this is often not the case.
In British Columbia the seizure of a consumer good (which includes vehicles) is governed by BC provincial legislation and consumer protection under the BC Provincial Property Security Act. In a nutshell, if a debtor stops being able to pay for a consumer good (like a vehicle) then the creditor (or lender) can either:
A: Sue the debtor for the full value of the debt, including legal costs. OR
B: Seize the goods covered by the security
They cannot do both.
Most common Question regarding Seize or Sue Legislation is BC
Dear Colleen,
I have a vehicle that I cannot make payments on anymore. So, I understand that there is a seize or sue rules in BC (under PPSA rules) that may affect me? To date, I have notified the dealership that gave me the loan to buy the car that I can no longer pay. But what I need to know is what happens if they decide to sue me instead of seize the car.? What does it mean when the dealership has threatened to sue me if I don’t pay them? Does the seize or sue rules apply to me?
To be clear, do I own the car outright as soon as they say they are going to sue me? Or do they still own the car until the end of the court case? Thanks for you help about the Seize or Sue Laws
Confused, BCHello Confused BC,
With respect to your vehicle and the seize or sue rules, if you reside in BC and your car is registered in BC, then the “seize or sue” rule under the BC PPSA applies to you. So, if you borrow money to buy a vehicle, and for whatever reason, stop making the payments on the loan, the company that loaned your money i.e. “secured creditor” has two options to try to get paid back. They can seize the car, or sue you, but not both.
What does “Sue” mean?
A secured creditor can either seize or sue. If the secured creditor has decided to “sue” you rather than “seize” the vehicle, then their security (against the car) is no longer valid. But they actually have to “sue” you. So, to sue, they must send you a NOTICE from the a Court saying that they “Filed a Notice of Claim” . This is an attempt to get a judge to agree with them that you, the debtor, owe them money.
The secured creditor can’t just threaten to sue you; they actually have to file claim in the courts. The secured creditor has to send you a copy of the court documents to you personally. I have placed an example of an real court Notice so you can see what it looks like. Sometimes, collection agency’s will send a letter and make it appear like court papers.
So, its always a good idea to check
A secured creditor, in order to be “secured” must register their loan in a Registry called the provincial Personal Property Security Registry- PPR (per the PPSA rules – Personal Property Security Act) Once registered, then they have a “secured lien” on your vehicle. This registration lets anyone else looking into ownership of that vehicle to see that there is a creditor who has a charge or security against that specific vehicle.
Why check the PPSA registration?
A secured charge, or security against a vehicle will stick with a particular vehicle even if it is sold to someone else. Vehicles are easy to identify because they all have unique VIN numbers. The PPSA Registry will show who owns the vehicle (ownership) and will list any secured creditor.
If your secured creditor opted to sue you, then their charge or lien against the vehicle is no longer valid. So you are free to deal with the car as if there were no liens. So, if you are sued (served court Notice is sufficient), then you will own the car without any liens. But , be aware, the lien will not “automatically” be removed from the Registry. The car is now legally yours to deal with without the liens, but you may have to send a demand letter to have the lien removed from the PPSA registry system.
Why to Check PPSA before you buy a used car? Why you care if there is security registered against a vehicle.
A secured creditor registered against your vehicle in the PPSA does not interfere with you using the vehicle in any way. It only really matters if you intend on selling the vehicle (or if you are going to purchase one.) So, when a buyer comes along to buy a car or vehicle you are selling, they want to make sure that there are no liens registered under the PPSA. The lien of the secured creditor is against the specific vehicle (it follows the VIN number). So, the secured creditor has a right to seize any vehicle matching the VIN number and description of their security documents. It does not depend on who the owner is.
This is true if you buy a vehicle from someone else. You should always check the PPSA registry as there might be a secured creditor and they could come a take the vehicle from you – even if you don’t owe that creditor any money! The liens would move along with the car no matter who is the registered owner. This is one reason why if you are purchasing a vehicle personally you should do a PPR search to ensure that you vehicle of choice doesn’t have any such charges.
Unwitting consumers can lose out if they purchase a vehicle that has a preexisting charge. A secured creditor, like the bank, has the right to repossess the vehicle even if you may have purchased it and paid money to the previous owner. In these cases, and they have happened, the person who bought a vehicle without doing a search is left responsible for the old debt. We have had cases where the new owner had their new vehicle repossessed by a secured creditor even though the personally did not owe any money. Unfortunately, their only recourse in these situations is to sue the person who sold them the vehicle in the first place – and often the seller is hard to locate. The previous owner may even have declared personal bankruptcy which would mean new purchaser would lose the ability to proceed against that person in the courts.
This can be an issue that causes concern for anyone buying a used car, or anyone who finds themselves in vehicle loans that they can no longer afford.
