By Scott Birrenkott, WBA director – legal
Scott Birrenkott, WBA director – legal.
In the July/August “Wisconsin Banker,” we discussed right to cure notice requirements under the Wisconsin Consumer Act. Where that article provided a reminder about right to cure requirements, this article is written as a follow-up and provides a reminder about Uniform Commercial Code (UCC) repossession notice requirements. While these UCC requirements are longstanding, recent litigation has illustrated the importance of ensuring that a bank’s UCC notices are “sufficient.”
The UCC requires two types of notices when a secured creditor repossesses collateral: a pre-sale notice before disposition and a post-sale notice after. The pre-sale notice is designed to be an advance warning before collateral is sold and provides the debtor with an opportunity to act. The post-sale notice is designed to inform the debtor what happened once the collateral was sold (for example, how much the collateral sold for and how much might still be owed). The UCC provides for certain contents and form requirements for these notices to be “sufficient.”
Recent litigation and challenges to the sufficiency of creditors’ notices serves as a good reminder of the importance of adhering to those statutory content requirements. Because it could ultimately fall to a court to decide whether a creditor’s notice is “sufficient,” it is important to understand and adhere to the UCC’s form and content requirements.
Additionally, the UCC provides a safe harbor form of pre-sale notification (including a general form and a separate form for consumer-goods transactions) which, when completed, is deemed to provide sufficient information. No equivalent form exists for the post-sale notice (due to its nature as an accounting calculation and sale explanation).
Recent Wisconsin court decisions reflect the importance of language used within statutory notices because the decisions reaffirmed the legal sufficiency of the safe harbor language provided in the UCC. The decisions also demonstrate the importance that creditors ensure that their notices comply with the content requirements provided by the UCC. As such, banks should review the UCC, their notifications, and confirm that they are legally sufficient. While the UCC does permit some flexibility, banks that choose to deviate from the UCC’s standards should be prepared for potential challenges to the sufficiency of their notices.
