NEWS: The Wisconsin Court of Appeals granted Simplicity Credit Union a significant victory today, issuing an opinion that answered questions about post-repossession notices for lenders across the state.
The League and the Wisconsin Bankers Association (WBA) filed a joint “friend of the court” brief last fall to support Simplicity. The League’s outside counsel, the Husch Blackwell law firm, represented us. They have provided a copy of the court’s decision with key passages highlighted.
Background & legal issues
The case involves a Wisconsin couple who defaulted on a loan that was secured by a vehicle. Simplicity repossessed the vehicle. After picking it up, the credit union sent a “pre-sale notice” that told the borrowers their vehicle had been repossessed and that it would be sold. (The League offers a sample pre-sale notice as Exh. B to our ii Release No. B060, titling it “Notice of Our Plan to Sell Property.”)
The pre-sale notice quoted verbatim the “safe harbor” language from §409.614 of the Wisconsin Statutes (part of our state’s version of the Uniform Commercial Code or UCC): “The money that we get from the sale (after paying our costs) will reduce the amount you owe. If we get less money than you owe, you will still owe us the difference ….” The League’s sample notice uses the same language.
After selling the vehicle, the credit union also sent the borrowers a Statement of Accounting (the post-sale notice). As required by Wis. Stats. §409.616 (another provision in Wisconsin’s UCC), that notice informed the couple of the deficiency balance they still owed and how it was calculated. (The League offers a similar post-sale notice as Exh. C to our ii Release No. B060, titling it “Explanation of Calculation of Surplus or Deficiency.”)
The couple filed a class action lawsuit against Simplicity, alleging that the pre- and post-sale notices were legally insufficient under the UCC because they did not use language from a provision of the Wisconsin Consumer Act (WCA), Wis. Stats. §425.210.
Specifically, the couple alleged that under the WCA, the notices should have described the deficiency as the difference between the loan balance and the fair market value of the vehicle, rather than as the difference between the loan balance and the vehicle’s sale price.
In other words, they argued that instead of quoting the safe harbor language from the UCC, Simplicity should have altered that language to incorporate wording from the WCA.
The circuit court granted summary judgment in favor of Simplicity, dismissing the couple’s complaint, and they appealed.
The Court of Appeals opinion
The appellate court agreed with the trial court, concluding that, “Because the undisputed facts establish that Simplicity’s pre- and post-sale notices were legally sufficient, the circuit court properly granted summary judgment in favor of Simplicity and dismissed [the couple’s] complaint. Accordingly, we affirm.”
The following are some of the “high points” of the court’s opinion:
- The court decided that the WCA “does not alter what is required by the UCC’s notice provisions.”
- The court wrote that altering the UCC’s safe-harbor language because of the WCA provision would nullify the plain meaning of the UCC provision, which says that the safe-harbor form “provides sufficient information.”
- The court rejected the argument that the safe-harbor form was “misleading” because it did not state that their deficiency would be calculated using fair market value.
- The court reasoned that the provisions in the UCC and the WCA do not conflict, because the WCA says that the UCC governs transactions unless superseded by a particular provision of the WCA. According to the court, the couple’s reading of the statute “in fact creates conflict where none exists.”
The court’s opinion tracks the arguments that Simplicity’s attorneys made as well as points that The League stressed in its “friend of the court” brief.
Why this case is important
Lenders across Wisconsin and the rest of the U.S. rely on and quote the “safe harbor” language of the UCC for their repossession notices. But plaintiffs’ attorneys are finding ways to attack those notices.
Credit unions with bond coverage from TruStage may have seen a Feb. 29, 2024, Risk Alert from them, titled, “Post-repossession letters back in the crosshairs of predatory attorneys.” (You can log into their Business Protection Resource Center to view it.) In that alert, TruStage warned that “Litigation and class action lawsuits have again ramped up alleging defective notices of disposition (notice of sale or notice of intent to sell repossessed collateral and defective notices of deficiency), which can significantly impact credit unions.”
For example, plaintiffs’ attorneys won in Massachusetts several years ago. A court there ruled that one of their state’s consumer laws superseded the UCC provisions. The couple that sued Simplicity in Wisconsin relied heavily on that opinion to support their arguments, but the Wisconsin Court of Appeals disagreed. It recognized the differences between the Massachusetts statutes and Wisconsin’s WCA, writing, “we do not deem [the Massachusetts opinion] to be persuasive for at least this reason.”
In light of this new opinion, Wisconsin credit unions and other lenders can rely on the UCC’s “safe harbor” language for repossession notices.
The plaintiffs in this case could ask the Wisconsin Supreme Court to take up the case, but that court denies review in about 90% of civil cases. Husch Blackwell’s appellate attorneys tell us that they anticipate the court would not review this case because (a) the Court of Appeals decision is thorough and the issues are straightforward; (b) the case does not present a novel issue of law; (c) the statutes have been coexisting for many years and there is no statutory conflict; and (d) there have been excellent trial court decisions holding similarly in the state and federal courts.