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"Wow!!!", I said when I first encountered this scenario. "You mean to tell me that the bank is demanding the car back and you haven't missed a payment."

"That's right" the distraught woman cried on the other end of the phone. "I never missed a payment with the Scotiabank and I have made all my payments on time for nearly two years now. They want me to bring it to the dealer or they will come and get it. What am I going to do? I need this car for work! It's all I have in the world. I'll lose my job. What are they trying to do to me?"

I felt really bad for the lady, but I wasn't shocked that the bank could do this. What shocked me was the fact that they did do this. I had known for a long time that the banks have the right to seize a car even when all the payments are current, but this was the first time that I had heard of any bank exercising that right, especially where so many payments had been made.

Watch that fine print

Just so you know how this could happen to you I suggest you take out your loan agreement with the bank and read carefully down the very small print at the back of the contract. There you will probably find a paragraph that says something to the effect of ….. the Bank can require you to pay at once the total balance due …. If you become insolvent or bankrupt….

This woman was not bankrupt. She was insolvent however, as she had filed a Consumer Proposal (that's a legal process that allows you, the Consumer, to make an offer, or Proposal, to your creditors to reduce the amount of your debts; extend the time you have to pay off the debt, or offer some combination of both).

On behalf of this lady I called the Scotiabank Customer Service Division and was rebuffed by a gentleman who professed to be Senior Management (I am withholding the names to protect the privacy of the lady).

There IS a difference between Bankruptcy and Insolvency

He told me that as far as they were concerned there was no difference between a Bankruptcy and a Consumer Proposal.

I discussed the differences between Bankruptcy and a Consumer Proposal with him, and I explained in some detail that now that the lady's monthly payments to her unsecured creditors had been reduced to a manageable amount, her payment to the bank for the car was more secure than ever.

His response was "No, we don't care" he said, "she might fail to maintain her new agreement in the Consumer Proposal and end up Bankrupt. By that time the car might be damaged or something. We are cutting our losses and taking the car and selling it and then we will be billing her for the shortfall".

I called Dave Goldhawk, at Goldhawk Fights Back. The lady who called me back said that not enough of these types of situations occur so it would not create enough attention and therefore they would not be interested in the case.

Legal Remedy Was Cost Prohibitive

I approached our lawyers and was told that the chances of winning a lawsuit against the bank were less than 50 / 50. After all, the clause was in the loan agreement, she signed it, and the bank had every right to exercise it. My argument was that the lady had been paying on the car and therefore she had built up equity in the vehicle also. She had a right therefore to secure her interest in the vehicle as well as the Bank. Good argument or not, the case was cost prohibitive. The cost quoted for a case like this was in excess of $25,000.00. We were lost as to what to do, so we waited.

True to their word the bank scooped the car. The only saving grace was that we managed to get her into another car right away at a similar monthly payment.

I'm not really knocking the Scotiabank for what it did … oh hells bells… Yes I am!!! I was very disappointed that something could not have been worked out to allow the lady to keep the car she knew and paid for in priority to everything else.

Watch That Fine Print!

I do want you however, as a consumer, to be more aware of what you are signing. Please, take the time needed to read the small print. Ask your representative what policies are being enforced and by whom. If something goes wrong or you find yourself in financial difficulty, what are your options and where do you turn?

It's a competitive world out there. It's up to you to protect yourself and get the best deal going.

Think Thrifty.