Today's Trends in Credit Regulation

“Safe Harbor” Forms
By Latif Zaman

Deciphering consumer finance statutes can be a daunting proposition for creditors and even counsel. “Safe harbor” provisions that appear in laws or regulations greatly simplify the compliance process by providing model forms for contracts or notices, which, if used, ensure satisfaction of statutory requirements. However, for whatever reason, not all creditors use “safe harbor” forms, risking a claim by the consumer that the form provided did not comply with the law. In a recent case, a creditor was sued when it chose to use its own form, rather than the “safe harbor” form, but a Missouri appellate court found that the creditor had nevertheless complied with pre-sale notice content requirements despite not strictly adhering to the provided “safe harbor” form.

Zachary and Marsha Levison obtained a loan from First Community Credit Union that was secured by a car they bought with part of the proceeds. After the Levisons defaulted on the loan, First Community repossessed the car. After selling the car, First Community sued to recover the deficiency. The Levisons argued that First Community’s pre-sale notice did not comply with the statutory content requirements of the Missouri version of Article 9 of the Uniform Commercial Code. The trial court granted the Levisons’ motion to dismiss. The Court of Appeals of Missouri reversed and remanded the case.

The appellate court noted that, under Missouri law, a right to a deficiency judgment exists only after strict compliance with statutory requirements prior to selling repossessed property. Therefore, any creditor error in regards to a pre-sale notice can result in a loss of the right to a deficiency judgment. While Mo. Rev. Stat. § 400.9-614 states that no particular phrasing is required for the pre-sale notice, the statute provides a “safe harbor” form that provides for all the required information. First Community, however, did not use the “safe harbor” form for the pre-sale notice it sent.

The trial court found that First Community did not meet the requirements of Mo. Rev. Stat. § 400.9-614(1) because it did not (1) properly describe the co-debtors in each debtor’s respective notice; (2) specify which of two phone numbers included in the notice would provide the debtor with information regarding the amount to be repaid to redeem the vehicle; or (3) specify that the phone numbers and address listed could be used to discover additional information regarding the disposition of the vehicle or the obligation due. All three of the issues the trial court pointed out reflected discrepancies between the pre-sale notice provided by First Community and the legislative “safe harbor” form.

The appellate court found that while the “safe harbor” form includes a description of co-debtors, such description is not required under Mo. Rev. Stat. § 400.9-614(1). The appellate court noted that the statute does not require the creditor to inform one co-debtor that another co-debtor has also received the pre-sale notice. Similarly, while the “safe harbor” form specifies that a phone number and a mailing address could be used to attain certain information, the appellate court found that the statute only requires that the number and address be provided. Accordingly, the appellate court concluded that First Community fulfilled the statutory pre-sale notice content requirements despite not adhering to the provided “safe harbor” form.

The appellate court’s holding reflects that use of this “safe harbor” form is not mandatory. A creditor can comply with pre-sale notice requirements without necessarily tracking the language or providing additional content found in the “safe harbor” form. That said, “safe harbor” forms exist for a reason, and using them might be the safest course of action for a creditor. Perhaps the Missouri appellate court said it best when it said that “parties who fail to use the Safe Harbor Form do so at their peril.”

First Community Credit Union v. Levison, 2013 Mo. App. LEXIS 113 (Mo. App. January 29, 2013).

Latif Zaman is an associate in the Maryland office of Hudson Cook, LLP. He can be reached at 410-782-2346 or by email at

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