Practitioner Pointer! Best Buy claiming PMSI in consumer goods.

02 Jan Practitioner Pointer! Best Buy claiming PMSI in consumer goods.

Recently I received form letters from a law firm representing HSBC Bank Nevada for Best Buy.  The letters stated: “Please be advised that our client holds a purchase money security interest in consumer goods in regards to the above-referenced claim.”  It then has three options: (1) Debtor will reaffirm; (2) Debtor will make a cash redemption in a lump sum payment; or (3) Debtor will surrender the collateral.

No documentation is attached to support their claim that their client has a PMSI.

In response to their request I sent a letter to the law firm requesting they provide me with evidence of Best Buy’s security interest in the merchandise.  The documentation could be in the form of a copy of the signed retail installment agreement, signed security agreement and charge slips, or any other documents or documents they may have to create a valid security interest under Texas state law.  My letter goes on to say that if the collateral is consumer goods, it is not necessary that their claimed security interest be perfected by filing in the public records, but it is necessary that there be a valid written agreement granting the security interest and reasonably describing the collateral.

I also advise them that if they fail to provide the proof within thirty days of the date of my letter, I will assume Best Buy does not have a valid security interest and I am advising my client to contact me if Best Buy later attempts to enforce the alleged security interest after discharge.  Further, if they attempt to contact my client directly regarding this matter or if they attempt to repossess the consumer goods after discharge, I may bring an action against them for violations of the Bankruptcy Discharge, the Texas Debt Collection Act, the Texas Deceptive Trade Practices-Consumer Protection Act, and other state and federal laws.

A few days later I received a response from the law firm advising me it will take them approximately six weeks  to get the necessary documentation – documentation that should have been sent with the original letter.   I am not sure why they do not send the paperwork – maybe they have to pay for the documentation, or they have too many claims that they don’t have time to obtain the paperwork, or too many attorneys don’t question their claims, or maybe it is a combination of all of these reasons.

Fellow practitioners, please do not take creditors at their word that a debt is secured.  Make them produce the documentation to prove that it is secured.  Otherwise, your client may pay for merchandise that is unsecured and is the debt is clearly dischargable in his or her bankruptcy. Or worse yet, your client may surrender merchandise that he or she could have legally kept because it was unsecured.

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Jay S. Fleischman is a bankruptcy lawyer with offices in Los Angeles and New York. He can often be found on Google+ and Twitter, where he shares information about consumer protection issues and personal finance.
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