Auto Indirect

Yes, unless the cash price was $1,000 or less.

ARTICLE 9A

The UCC-Secured Transactions Article, Ala. Code §§ 7-9A-101 et seq. ("Article 9A"), allows a secured party to collect a deficiency. Article 9A requires a secured party to give the obligor an explanation of calculation of surplus or deficiency after a sale if the obligor owes a deficiency under Ala. Code § 7-9A-615 and the secured party does not waive the deficiency. Ala. Code § 7-9A-616.

Timing. A secured party must send the explanation of calculation of surplus or deficiency:

• before or when the secured party first makes written demand on the obligor for payment of the deficiency; and
• within 14 days after receipt of a request from the obligor for an explanation of the deficiency.

Ala. Code § 7-9A-616(b)(1). The secured party does not have to send the explanation of calculation of surplus or deficiency if the secured party sends a record waiving the right to a deficiency within 14 days after receipt of the request for an explanation of the deficiency. Ala. Code § 7-9A-616(b)(2).

Content. The explanation must show:

• Deficiency. The amount of the deficiency;
• Contact information. A telephone number or mailing address from which the obligor may obtain additional information about the transaction;
• Future adjustments. If applicable, a statement that future debits, credits, charges, including additional credit service charges, rebates, and expenses may affect the amount of the deficiency; and
• Explanation of the deficiency. An explanation of how the secured party calculated the deficiency that includes the following items in the following order:
  • Aggregate unpaid credit balance. The aggregate amount of obligations subject to the security interest, calculated as of a specified date.

If the secured party took or received possession of the collateral after default, the specified date must be not more than 35 days before the secured party took or received possession. If the secured party took or received possession of the collateral before default or did not take possession of the collateral, the specified date must be not more than 35 days before the sale.

If the secured party included a rebate of unearned credit service charge in the disclosed aggregate unpaid credit balance, the explanation must reflect that fact.

• Sale proceeds. The amount of the sale proceeds.
• Net unpaid credit balance. The aggregate unpaid credit balance minus the sale proceeds.
• Sale-related expenses. The type and amount of any expenses related to the sale, including expenses to retake, hold, prepare for sale, process, and dispose of the collateral, and any permitted attorney fees, that are:
  • known to the secured party; and
  • secured by the collateral.

The secured party may show the sum of the expenses or may itemize the expenses by type. If the secured party elects to show only the sum of the expenses, the secured party must identify the types of expenses included in the sum.

• Other credits. The type and amount of any other credits or refunds that are:
  • known to the secured party; and
  • not yet deducted from the aggregate unpaid credit balance.

The secured party may show the sum of the credits or may itemize the credits by type. If the secured party elects to show only the sum of the credits, the secured party must identify the types of credits included in the sum.

• Deficiency. The amount of the deficiency.

Ala. Code § 7-9A-616(c); Ala. Code § 7-9A-616(a)(1).

Format. Article 9A does not impose mandatory phrasing requirements for the explanation. The explanation may contain minor errors as long as the errors are not seriously misleading, and the explanation substantially complies with the statutory requirements. Ala. Code § 7-9A-616(d).

Fee. Article 9A requires a secured party to give one explanation of how the deficiency was calculated at no charge upon request during any six-month period in which the secured party did not send an explanation. The secured party may charge not more than $25 for each additional request. Ala. Code § 7-9A-616(e).

Definitions. Article 9A contains the following relevant definitions.

• Authenticate. Article 9A defines the term "authenticate" to mean:
  • to sign; or
  • with present intent to adopt or accept a record, to attach to or logically associate with the record an electronic sound, symbol, or process.

Ala. Code § 7-9A-102(a)(7).

• Debtor. Article 9A defines the term "debtor" to include a person having an interest, other than a security interest or other lien, in the collateral, whether or not the person is an obligor.

Ala. Code § 7-9A-102(a)(28).

• Obligor. Article 9A defines the term "obligor" to mean a person that:
  • owes payment or other performance under the secured obligation;
  • has provided property other than the collateral to secure payment or other performance of the obligation; or
  • is otherwise accountable in whole or in part for payment or other performance of the obligation.

Ala. Code § 7-9A-102(a)(59).

• Record. Article 9A defines the term "record" to mean information inscribed on a tangible medium or stored in an electronic or other medium that is retrievable in perceivable form.

Ala. Code § 7-9A-102(a)(70).

• Request. Article 9A defines the term "request" to include a record:
  • authenticated by the obligor;
  • requesting an explanation of how the secured party calculated the deficiency; and
  • sent after disposition of the collateral under Ala. Code § 7-9A-610.

Ala. Code § 7-9A-616(a)(2).

MINI-CODE

The Alabama Consumer Credit Act, Ala. Code §§ 5-19-1 et seq. ("Mini-Code"), bars a creditor from collecting a deficiency if the original cash price was $1,000 or less. Ala. Code § 5-19-13.

July 31, 2019   Show Redlined Changes