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Financial Services Law Insights and Observations

Massachusetts Appeals Court holds deficiency debt notice should be applied retroactively

Courts State Issues Appellate Consumer Finance Auto Finance

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On July 21, the Massachusetts Appeals Court held that a 2018 Massachusetts Supreme Judicial Court’s (SJC) decision in Williams v. American Honda Fin. Corp., which resolved a conflict in state law regarding the proper way for a creditor to calculate a consumer’s deficiency debt in an automobile repossession notice, should be applied retroactively. After a consumer defaulted on his car loan, his creditor sent him a presale repossession notice advising him that the amount owed would be reduced by the money received from the sale of the vehicle. This notice was insufficient under Williams, but the creditor argued that the decision should only apply prospectively, and the Superior Court agreed and dismissed the consumer’s complaint. The consumer appealed.

In Williams, the SJC resolved a conflict as to whether the Massachusetts Uniform Commercial Code (UCC), G. L. c. 106, §§ 9-600, or the Massachusetts Motor Vehicle Retail Installment Sales Act (RISA), G. L. c. 255B should be used to calculate a consumer’s deficiency debt in an automobile repossession notice. While both statutes contain similar elements, they also contain conflicting provisions, which the SJC resolved in Williams by holding that all automobile repossession notices are required to state that the consumer’s deficiency debt will be calculated, in accordance with RISA, based on the difference between the unpaid balance and the vehicle’s fair market value. The SJC further determined that the fair market value language in RISA displaces the UCC’s inconsistent safe harbor provision.

The Appeals Court first noted that decisions in Massachusetts construing a statute are presumptively given retroactive effect. The Appeals Court further held that Williams is intended “to give effect to the clear meaning of a statute designed to protect consumers,” which was “best accomplished through retroactive application.” In agreeing with the consumer, and noting that because Williams does not include a retroactive-prospective analysis, the Appeals Court stated that “there are no exceptional circumstances that would justify departure from the presumption of retroactivity.”

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