The enforceability of security interests in consumer goods

Abstract

Consumers who grant security interests to creditors pay lower rates in return, but this seemingly innocuous arrangement has recently been regulated extensively. The Uniform Consumer Credit Code authorizes courts not to enforce certain security interests if enforcement would impose "undue hardship" on the consumer. Several states also prohibit creditors who foreclose from later suing for deficiency judgments, in which they attempt to recover the difference between the unpaid debt and the amount realized on foreclosure. This prohibition reduces the attractiveness of security as a risk reduction device. In addition, proposals have been made to prevent creditors from taking security interests in consumer goods collateral except for purchase money security interests.

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